Term deposit rates mixed ahead of BSP meeting

Rates fetched by the sevenand 28-day term deposits rose, while the yield of the 14-day tenor declined slightly ahead of the first rate-setting meeting of the Bangko Sentral ng Pilipinas (BSP) for this year.

The yield of the seven-day tenor climbed by 7.57 basis points to 5.1411 percent from 5.0654 percent last week, while the 28-day term deposits fetched a slightly higher rate of 5.1788 percent from 5.1779 percent.

On the other hand, the 14day term deposits fetched a lower yield of 5.1765 percent from last week’s 5.1770 percent.

The term deposit auction facility (TDF) was slightly oversubscribed yesterday with tenders for the three tenors reaching P51.19 billion versus the P50 billion offering.

Bids for the P20-billion seven-day term deposits amounted to P22.59 billion as banks swarmed the shorter-dated tenor, while tenders for the 28day tenor reached P11.7 billion and exceeded the P10 billion issue size.

The 14-day tenor was undersubscribed as bids only amounted to P16.9 billion, short of the P20 billion volume.

The liquidity absorption facility was launched in June 2016 as part of the shift to the interest rate corridor (IRC) framework to guide short-term market rates toward the BSP policy interest rate.

Economists expect the BSP to keep interest rates today as inflation continued to ease to a 10-month low of 4.4 percent last January from 5.1 percent in December.

Inflation surged to 5.2 percent last year from 2.9 percent in 2017 due to higher oil and food prices as well as the weak peso. It peaked at 6.7 percent in September and October before slowing down for three straight months.

Authorities raised interest rates by 175 basis points in five straight rate-setting meetings from May to November last year to prevent inflation from spiraling out of control.