Term deposit yields inch higher as demand shifts to longer tenor

YIELDS ON term deposits offered by the Bangko Sentral ng Pilipinas (BSP) rose on Wednesday on expectations of faster October inflation.

Total tenders for the central bank’s term deposit facility (TDF) stood at P593.985 billion on Wednesday, beyond the P490 billion on the auction block as well as the P552.97 billion in bids logged a week ago.

Broken down, bids for the seven-day deposits amounted to P189.03 billion, lower than the P220 billion on the auction block as well as the P227.445 billion in tenders seen in the previous week’s offering.

Accepted rates for the tenor ranged from 1.88% to 2.1%, a slightly higher margin than the 1.835% to 2.05% band logged last week. This caused the average rate for the one-week papers to settle at 1.954%, 1.67 basis points (bps) higher than the 1.9373% seen a week ago.

Meanwhile, for the 14-day term deposits, bids reached P404.955 billion, higher than the P270-billion offering as well as the P325.525 billion in  bids seen at last week’s auction.

Lenders asked for yields within the 1.875% to 2.1225% range, a tad higher versus the 1.85% to 2.1975% band seen in the prior week. This brought the two-week tenor’s average rate to 2.0454%, climbing by 1.17 bps from the 2.0337% logged on Oct. 28.

For the fourth week in a row, the BSP did not offer 28-day term deposits. This follows the start of the central bank’s weekly auctions of its own bills with the same tenor.

The TDF and the BSP’s securities are among regulator’s main tools to gather excess liquidity in the financial system and to better guide market interest rates.

“There was a notable shift of preference to the longer tenor as the 7-day TDF was undersubscribed with 0.86 times the offer volume. The overall results of the TDF auction show that liquidity in the financial system remains ample,” BSP Deputy Governor Francisco G. Dakila, Jr. said in a statement on Wednesday.

Yields rose ahead of the release of October inflation data, which the market expects to have ticked higher, said Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort.

“TDF auction yields again continued to go up, though slightly, ahead of the inflation data that could pick up due to storm damage recently that led to higher prices of food and other agricultural products,” Mr. Ricafort said in a text message.

Inflation may have picked up slightly in October due to a rise in food prices and transport costs, as well as the impact of base effects, analysts said.

A poll of 15 economists by BusinessWorld last week yielded a median estimate of 2.4%, close to the higher end of the 1.9-2.7% forecast given by the BSP and well within the 2-4% target this year.

If realized, the median estimate will be a tad faster than 2.3% in September and 0.9% in October 2019. The central bank’s latest average inflation forecast for this year is at 2.3%. — Luz Wendy T. Noble

Post A Comment