YIELDS on the term deposit facility (TDF) of the Bangko Sentral ng Pilipinas (BSP) climbed on Wednesday following rate hike signals from the central bank chief.
Total bids for the BSP’s term deposits reached P276.096 billion, below the P280-billion offer as well as the P286.885 billion in tenders against a P310-billion offer recorded last week.
Broken down, the seven-day papers fetched bids amounting to P169.326 billion, higher than the P150-billion auctioned off by the BSP. This was also higher than the P154.362 billion in tenders logged in the previous auction for a P170-billion offering.
Banks asked for yields ranging from 4.58% to 4.8398%, a narrower margin compared to the 4.28% to 4.874% band seen a week ago. This caused the average rate of the one-week papers to rise by 9.74 basis points (bps) to 4.7093% from 4.6119%.
Meanwhile, demand for the 14-day term deposits amounted to just P106.770 billion, below the P130-billion offering. This was also lower than P132.523 billion in tenders for the P140-billion offer a week ago.
Accepted rates for the papers were from 4.48% to 5.2125%, higher than the 4.3% to 4.8445% range seen on Oct. 12. With this, the average rate of the two-week paper inched up by 11.19 bps to 4.7611% from 4.6492% in the previous week’s auction.
The central bank has not auctioned 28-day term deposits for more than a year to give way to its weekly offering 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 guide market rates.
Term deposit yields were higher as the central bank chief hinted at another rate increase at the Monetary Board’s Nov. 17 meeting, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
BSP Governor Felipe M. Medalla last week said the central bank will consider another big rate hike in their Nov. 17 policy meeting to support the peso and prevent its depreciation from further stoking inflation.
Mr. Medalla said they are looking at a 50-bp or 75-bp increase next month to help cool inflation and ease currency pressures stemming from a strong dollar amid the Federal Reserve’s hawkish stance.
The BSP has raised benchmark rates by 225 bps since May, while the Fed has hiked borrowing costs by 300 bps so far since March.
Philippine headline inflation was at 6.9% last month, up from 6.3% in August and 4.2% in the same month last year. It matched the 6.9% print in October 2018 and was the fastest since the 7.2% pace logged in February 2009.
The September print marked the sixth straight month that inflation breached the central bank’s 2-4% target for the year.
For the first nine months, headline inflation averaged 5.1%, faster than the 4% seen in the same period last year but below the BSP’s 5.6% forecast for 2022.
Meanwhile, the peso has significantly weakened against the dollar this year as the Fed normalizes its policy stance. On Wednesday, the local unit closed at P 58.945 a dollar, down by 19.5 centavos from the previous day and by 15.58% or P7.945 from its P51 close on Dec. 31, 2021. — Keisha B. Ta-asan