YIELDS ON THE central bank’s term deposit facility were mixed on Wednesday prior to a two-week lockdown in the National Capital Region (NCR) and amid market expectations of slower inflation in July.

Total bids for the term deposit facility (TDF) of the Bangko Sentral ng Pilipinas (BSP) amounted to P643.58 billion on Wednesday, above the P560-billion offer and also surpassing the P613.267 billion in tenders seen during last week’s auction.

Broken down, demand for the seven-day papers amounted to P185.592 billion, going beyond the P160 billion auctioned off by the BSP as well as the P181.371 billion in tenders logged last week.

Accepted yields for the tenor ranged from 1.675% to 2.02%, a slightly narrower band compared with the 1.65% to 2.05% seen previously. This caused the average rate of the one-week deposits to rise by 2.21 basis points (bps) to 1.7375% from 1.7154% on July 28.

Meanwhile, the two-week papers fetched bids worth P457.988 billion, surpassing the P400-billion offer and the P431.896 billion in tenders seen at last week’s auction.

Banks asked for yields ranging from 1.719% to 1.759%, a smaller margin compared with the 1.72% to 1.7695% band seen in the previous auction. With this, the average rate for the 14-day term deposits dipped by 0.38 bp to 1.7448% from 1.7486% previously.

The central bank did not offer 28-day term deposits for the 41st straight auction to give way to its weekly offerings of bills with the same tenor.

The BSP uses the TDF and its short-term bills to mop up excess liquidity in the financial system and to better guide market rates.

TDF yields were mixed this week as investors priced in the impact of the upcoming lockdown in Metro Manila, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said.

“This may have to do with preparations for the enhanced community quarantine as investors increase their arsenal of peso funds to tide them over the lockdown that could reduce economic activities and may necessitate drawing of funds from savings,” Mr. Ricafort said in a text message.

Metro Manila, where more than a third of the country’s economic activities happen, will be under the strictest lockdown classification again from Aug. 6 to 20 as the government aims to prevent the spread of the more infectious Delta variant of the coronavirus disease 2019.

Market expectations of slower inflation in July also affected the movement of TDF yields this week, Mr. Ricafort added.

The Philippine Statistics Authority will release the July inflation report on Thursday, Aug. 5.

A BusinessWorld poll last week of 15 analysts yielded a median estimate of 4% for July headline inflation. If realized, this would be slower than the 4.1% print in June and will be the first time inflation is within the BSP’s 2-4% target since the 3.5% in December 2020.

Analysts said inflation likely eased last month due to lower meat prices, which is seen to offset higher costs of oil and other food items.

This year, the central bank expects inflation to average 4%. The CPI reading in the first half of the year was still above target at 4.4%. — Luz Wendy T. Noble