Term deposit rates hit record levels

The term deposit auction facility (TDF) was undersubscribed yesterday due to the high demand for cash during the Christmas holidays, but yields continued to hit record levels.

The P70-billion auction yesterday was undersubscribed, with tenders reaching only P58.48 billion as banks stay away from the facility due to the higher demand for cash from clients due to the Christmas season.

The seven-day tenor was oversubscribed as bids only amounted to P37.23 billion versus the P40 billion volume, while bids for the 14-day term deposits amounted to P14.62 billion or P5.38 billion lower than the issue size of P20 billion.

Likewise, bids for the 28-day tenor only amounted to P6.63 billion compared to the auction size of P10 billion.

Yields rose across the board to hit record levels anew after the Bangko Sentral ng Pilipinas (BSP) kept interest rates unchanged as inflation is expected to ease back to the central bank’s two to four percent target earlier than expected next year.

The seven-day tenor fetched a record 5.1462 percent yesterday or 3.27 basis points higher than last week’s 5.1135 percent, while the yield of the 14-day term deposits rose 5.39 basis points to a new all-time high of 5.2188 percent from 5.1649 percent.

The 28-day term deposit rate inched up 1.4 basis points to a record 5.2092 percent from 5.1952 percent last week.

BSP Deputy Governor Diwa Guinigundo said the result of the auction reflects the positive sentiment of the market toward inflation.

“They can now afford to go a little longer knowing that lower inflation gives the BSP greater latitude in terms of monetary policy actions,” Guinigundo said.