Home Banking & Finance Yields on BSP’s term deposits drop as inflation eased in June

Yields on BSP’s term deposits drop as inflation eased in June

THE CENTRAL BANK’S term deposits fetched lower yields on Wednesday. — BW FILE PHOTO

YIELDS ON THE central bank’s term deposits slipped on Wednesday as inflation came in slower than expected in June.

Demand for the term deposit facility (TDF) of the Bangko Sentral ng Pilipinas (BSP) amounted to P771.292 billion on Wednesday, surpassing the P540 billion on offer and the P652.901 billion in tenders seen a week ago.

Broken down, bids for the seven-day term deposits reached P216.209 billion, higher than the P150 billion auctioned off by the BSP and the P208.413 billion in tenders logged for the previous week’s offering.

Accepted rates for the tenor ranged from 1.7% to 1.729%, a thinner band compared with the 1.7% to 1.7345% seen a week earlier. This caused the average rate of the papers to inch down by 0.85 basis point (bp) to 1.7176% from 1.7261% previously.

Meanwhile, the 14-day papers fetched bids amounting to P555.083 billion, well above the BSP’s P390-billion offer and also beating the P444.488 billion in tenders received last week.

Banks asked for yields ranging from 1.75% to 1.8144%, a narrower margin versus the 1.75% to 1.83% band recorded a week ago. With this, the average rate of the two-week term deposits slipped by 1 bp to 1.8014% from 1.8114% on June 30.

The BSP did not offer the 28-day term deposits for the 37th straight week to give way to its weekly offerings of bills with the same tenor.

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

The lower yields on the BSP’s term deposits came a day after the release of the consumer price index (CPI) report, which showed that headline inflation eased last month, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a text message.

Inflation eased to a six-month low in June, the Philippine Statistics Authority (PSA) reported on Tuesday.

Preliminary data from the PSA showed headline inflation stood at 4.1% in June, easing from the 4.5% logged in May and the slowest rate in six months or since the 3.5% recorded in December 2020. However, this was above the 2.5% recorded in June last year.

The latest headline figure was lower than the 4.3% median in a BusinessWorld poll conducted late last week. It likewise fell within the 3.9%-4.7% estimate given by the Bangko Sentral ng Pilipinas (BSP) for June, but was still higher than the central bank’s 2-4% target for the year.

For the first half, headline inflation averaged 4.4%, also above the BSP’s target band and its 4% forecast for 2021. — L.W.T. Noble