By Keisha B. Ta-asan, Reporter
YIELDS on the Philippine central bank’s term deposits on Wednesday fell after a monetary tightening pause last week.
Demand for the Bangko Sentral ng Pilipinas’ (BSP) term deposit facility (TDF) hit P199.795 billion, higher than P190 billion on the auction block. Last week, bids reached P240.063 billion against P230 billion on offer.
Tenders for one-week term deposits reached P103.975 billion, failing to beat the P110-billion offer. Last week, bids hit P140.537 billion against P140 billion on offer.
Banks asked for yields ranging from 6.3% to 6.64%, wider than .525% to 6.645% on May 17. The average rate for the seven-day debt dipped by 0.36 basis point (bp) to 6.5926% from 6.5962% last week.
Meanwhile, the 14-day deposits attracted P95.82 billion in bids, higher than P80 billion being sold by the central bank. Last week, tenders hit P99.526 billion against a P90-billion offer.
Accepted rates for the two-week debt ranged from 6.2% to 6.6344%, narrower than 6.199% to 6.655% last week. This caused the tenor’s average rate to drop by 2.15 bps to 6.5935%.
The BSP has not auctioned off 28-day term deposits for more than two years to give way to its weekly offerings of securities with the same tenor.
It uses term deposits and 28-day bills to mop up excess liquidity in the financial system and to better guide market rates.
Yields on the term deposits slipped after the central bank kept policy rates steady last week as inflation continued to ease, Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said in a Viber message.
On Thursday, the Philippine central bank kept the key rate at 6.25%. It was its first pause after increasing borrowing costs nine times straight since May last year, for a total of 425 bps.
The BSP also lowered its full-year inflation forecast for this year to 5.5% from 6%. It trimmed its projection to 2.8% next year from 2.9%.
TDF yields were also lower this week after strong signals of a consistent pause in the near term, Mr. Ricafort said.
Last week, central bank Governor Felipe M. Medalla said the central bank would likely keep rates at the next two or three policy meetings, depending on inflation data and the US Federal Reserve’s next policy moves.
The BSP meetings are scheduled for June 22, Aug. 17 and Sept. 21.
Inflation eased to an eight-month low of 6.6% in April. For the first four months of the year, it averaged 7.9%, still above the BSP’s 5.5% full-year forecast and 2-4% target.
The US Federal Reserve has raised borrowing costs by 500 bps since March last year, bringing the Fed fund rate to 5-5.25%. The Fed is set to meet on June 13-14.
Federal Reserve Chairman Jerome H. Powell on Friday said it was unclear if the US central bank needs to tighten further, as officials balance uncertainty about the impact of past hikes.