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Yields on term deposits end mixed

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YIELDS on the Bangko Sentral ng Pilipinas’ (BSP) term deposits were mixed on Wednesday as the market looked ahead to the Monetary Board’s policy decision on Thursday.

The central bank’s term deposit facility (TDF) attracted bids amounting to P207.107 billion on Wednesday, above the P200 billion on the auction block but lower than the P212.412 billion seen a week ago for a P180-billion offer.

Broken down, tenders for the seven-day papers reached P116.409 billion on Wednesday, higher than the P90 billion auctioned off by the central bank. This was also more than the P112.799 billion in bids for the P90-billion offer seen the previous week.

Banks asked for yields ranging from 6.275% to 6.5275%, a wider and lower band compared to the 6.5% to 6.535% recorded a week ago. This caused the average rate of the one-week deposits to go down by 0.99 basis point (bp) to 6.5145% from 6.5244% previously.

Meanwhile, bids for the 14-day term deposits amounted to P90.698 billion on Wednesday, lower than the P110-billion offering and the P99.613 billion in tenders for the P90 billion placed on the auction block last week.

Accepted rates for the tenor were at 6.55% to 6.595%, slightly wider than the 6.55% to 6.59% margin recorded a week ago. With this, the average rate for the two-week deposits inched up by 0.15 bp to 6.5709% from the 6.5694% logged in the prior auction.

The BSP 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 BSP bills are used by the central bank to mop up excess liquidity in the financial system and to better guide market rates.

TDF yields were mixed on Wednesday ahead of the BSP’s policy meeting on Thursday, where it is widely expected to maintain its current stance, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

All 15 analysts surveyed in a BusinessWorld poll last week expect the Monetary Board to keep its target reverse repurchase rate at a 17-year high of 6.5% for a sixth straight meeting this week.

The BSP raised borrowing costs by a cumulative 450 bps from May 2022 to October 2023 to help bring down elevated inflation.

“Higher-for-longer signals from most US Federal Reserve officials recently indicate that more evidence is needed… before cutting Fed rates,” Mr. Ricafort added.

The US central bank this month left its target rate unchanged at the 5.25%-5.5% range for a seventh straight meeting.

Fed officials are now pricing in just one rate cut this year, compared with expectations of three cuts previously. They also signaled that policy easing could be pushed back to as late as December.

For his part, BSP Governor Eli M. Remolona, Jr. earlier said the central bank does not need to wait for the Fed before it starts policy easing, adding the Monetary Board could begin cutting rates as early as August. — Luisa Maria Jacinta C. Jocson

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