YIELDS on the Bangko Sentral ng Pilipinas’ (BSP) term deposits went down on Wednesday, with investors betting on a tightening pause amid easing inflation.
The central bank’s term deposit facility (TDF) attracted bids amounting to P409.621 billion on Wednesday, above the P300 billion on the auction block as well as the P364.717 billion seen a week ago for a P230-billion offer.
Broken down, tenders for the seven-day papers reached P251.915 billion, higher than the P170 billion auctioned off by the central bank and the P213.053 billion in bids for a P130-billion offer seen the previous week.
Banks asked for yields ranging from 6.375% to 6.64%, wider and lower than the 6.5% to 6.6655% band seen a week ago. This caused the average rate of the one-week deposits to decline by 4.20 basis points (bps) to 6.5939% from 6.6359% previously.
Meanwhile, bids for the 14-day term deposits amounted to P157.706 billion, higher than the P130-billion offering and the P151.664 billion in tenders for a P100-billion offer seen on April 5.
Accepted rates were from 6.5995% to 6.6566%, slightly lower and narrower than the 6.5% to 6.6772% margin recorded a week ago. With this, the average rate for the two-week deposits inched down by 1.03 bps to 6.6362% from the 6.6465% logged in the prior auction.
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.
The term deposits and the 28-day bills are used by the central bank to mop up excess liquidity in the financial system and to better guide market rates.
“The BSP raised the volume offering for the TDF auction to P300 billion from P230 billion. Based on actual bids received last week, the total offer volume was reallocated between the 7-day and 14-day tenors at P170 billion (from P130 billion) and P130 billion (from P100 billion), respectively. Total tenders received reached P409.621 billion, which was well above the BSP’s expected volume range,” BSP Deputy Governor Francisco G. Dakila, Jr. said in a statement.
“The results of the TDF auction continued to reflect market participants’ high demand for both tenors. Moving forward, the BSP’s monetary operations will remain guided by its assessment of the latest liquidity conditions and market developments,” Mr. Dakila added.
TDF yields went down after recent signals of a possible pause in rate hikes after inflation eased to a six-month low in March, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
The central bank may consider pausing its monetary tightening next month if April inflation does not accelerate, BSP Governor Felipe M. Medalla said over the weekend.
He said a pause in interest rate increases was possible “if the April CPI (consumer price index) is not higher than the March CPI” or if there is “zero or negative month-on-month inflation.”
Headline inflation eased for a second consecutive month in March to 7.6% from 8.6% in February.
For the first quarter, inflation averaged 8.3%, higher than the BSP’s 6% forecast and 2-4% target for the year.
The Monetary Board last month hiked benchmark interest rates by 25 bps to help bring down elevated inflation.
This brought the yield on its overnight reverse repurchase facility or its key rate to 6.25%.
Since May 2022, the BSP has raised borrowing costs by a total of 425 bps.
Its next meeting will be held on May 18. — Luisa Maria Jacinta C. Jocson