Yields on term deposits climb ahead of BSP’s policy meeting

YIELDS on the term deposit facility (TDF) of the central bank continued to rise on Wednesday ahead of the Monetary Board’s policy setting on Thursday.

Demand for term deposits of the Bangko Sentral ng Pilipinas (BSP) reached P336.551 billion, below the P350-billion offer for this week. This is also slightly lower than the P337.24 billion in tenders seen last week for a P380-billion offer.

Broken down, bids for the one-week term deposits amounted to P195.418 billion, below the P210-billion offering and the P203.107 billion in tenders for a P240-billion offer logged the previous week.

Accepted rates were from 5% to 5.55%, a higher and wider range compared with the 4.899% to 5.35% band seen a week ago. This brought the average rate of the seven-day papers to 5.2787%, up by 21.19 basis points (bps) from the 5.0668% quoted previously.

Meanwhile, the 13-day papers fetched bids amounting to P141.133 billion, slightly above the P140-billion offer and also beating the P134.133 billion recorded on Nov. 9 for the same auction volume.

Lenders asked for yields ranging from 5% to 5.75%, higher than the 4.95% to 5.625% band logged a week earlier. With this, the average rate of the two-week deposits increased by 18.63 bps to 5.4662% from 5.2799% in the prior auction.

“The 14-day TDF (offered) on Nov. 16 and the 7-day TDF to be offered on Nov. 23 were changed to a 13-day and 6-day TDF, respectively, in view of the declaration of Nov. 30 as a regular holiday (Bonifacio Day),” the BSP said.

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 to better guide market rates.

“Rates are well-within expectations given that the market already knows where rates are heading after [today’s] policy rate adjustment by BSP,” a trader said in a Viber message.

The BSP is widely expected to hike interest rates by 75 bps at its Nov. 17 meeting and match the US Federal Reserve’s latest move to stabilize prices and support the peso.

Philippine headline inflation also quickened to 7.7% in October from 6.9% in September. For the first 10 months, inflation averaged 5.4%.

The Monetary Board has so far raised 225 bps since May, while the Fed has hiked borrowing costs by 375 bps since March.

The BSP could again match the Fed’s December decision at its own meeting next month on the back of a robust Philippine gross domestic product (GDP), Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

“Despite better-than-expected US inflation data recently, the Fed could still raise rates by a smaller +0.50 on the next rate-setting meeting on Dec. 14, as some Fed officials signaled recently that more work still needed to further bring down elevated US inflation to the target of 2%,” Mr. Ricafort said.

The Fed will hold its last policy meeting for the year on Dec. 13-14, while the BSP’s own review is scheduled on Dec. 15.

Philippine GDP expanded by 7.6% in the third quarter. For the first nine months, GDP growth averaged 7.7%, above the government’s 6.5-7.5% target.

Meanwhile, US consumer inflation slowed to 7.7% in October from the 8.2% print in September. Month on month, the consumer price index rose 0.4% after climbing by the same margin in September. — Keisha B. Ta-asan