Home Top News Yields on BSP’s term deposits inch up

Yields on BSP’s term deposits inch up

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YIELDS on the term deposits auctioned off by the Bangko Sentral ng Pilipinas (BSP) inched higher on Wednesday, with the longer tenor going undersubscribed, after the peso hit a near 19-month low.

Demand for the BSP’s term deposit facility (TDF) totaled P217.774 billion on Thursday, lower than the P230 billion on the auction block and the P239.787 billion in tenders seen for a P240-billion offer last week.

Broken down, the seven-day deposits attracted tenders amounting to P113.383 billion, higher than the P110-billion offering as well as the P112.063 billion in bids recorded the prior week for a P110-billion offer.

Rates for the one-week papers ranged from 6.51% to 6.55%, a tad wider than the 6.52% to 6.55% range recorded in the previous week. This brought the average rate for the tenor to 6.5352%, inching up by 0.28 basis point (bp) from the 6.5324% seen a week ago.

For the 14-day deposits, tenders reached P104.391 billion, below the P120-billion offering as well as the P127.724 billion in bids for P130 billion in two-week deposits auctioned off last week.

Accepted yields were from 6.56% to 6.6%, narrower and higher than the 6.5475% to 6.595% margin logged a week prior. This brought the average rate of the two-week deposits to 6.5762%, up by 0.21 bp from the 6.5741% logged a week ago.

The central bank has not auctioned off 28-day term deposits for more than three 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 BSP to mop up excess liquidity in the financial system and to better guide market rates.

TDF yields were slightly higher on Thursday after the peso breached the P58 level, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The peso closed at P58.27 per dollar on Tuesday, its weakest in more than 18 months or since its P57.275 finish on Nov. 8, 2022.

It was also the first time that the local unit closed at the P58-per-dollar level since Nov. 10, 2022.

BSP Governor Eli M. Remolona, Jr. said the central bank is ready to intervene if necessary to “smoothen excessive volatility and restore order during periods of stress.”

Hawkish signals from US Federal Reserve officials also affected TDF yields, Mr. Ricafort said.

Fed policy makers said on Tuesday the US central bank should wait several more months to ensure that inflation really is back on track to its 2% target before cutting interest rates, Reuters reported.

“In the absence of a significant weakening in the labor market, I need to see several more months of good inflation data before I would be comfortable supporting an easing in the stance of monetary policy,” Fed Governor Christopher Waller told the Peterson Institute for International Economics in Washington.

The timeline was echoed by Cleveland Fed President Loretta Mester in comments on Tuesday night at an Atlanta Fed conference.

The Fed has kept its benchmark policy rate at 5.25%-5.5% since last July and, stung by three months of stronger-than-expected inflation readings from January to March, is only cautiously welcoming more recent encouraging signs of a loosening in the labor market and return to further progress in lowering inflation toward its 2% target. — Luisa Maria Jacinta C. Jocson with Reuters

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