TDF yields climb on higher oil prices, government debt rates

YIELDS on the central bank’s term deposits went up on Wednesday as oil prices continued to surge and following the uptick in rates of government securities.

Total bids for the term deposit facility (TDF) of the Bangko Sentral ng Pilipinas (BSP) amounted to P585.627 billion on Wednesday, surpassing the P460-billion offering as well as the P521.718 billion in tenders logged in the previous auction.

Broken down, the seven-day papers fetched bids worth P239.493 billion, higher than the P150 billion on the auction block as well as the P175.644 billion in tenders seen a week earlier.

Banks asked for yields ranging from 1.7% to 1.78%, a thinner band than the 1.7% to 1.83% logged last week. With this, average rate of the one-week term deposits increased 0.37 basis point (bp) to 1.7355% from 1.7318% previously.

Meanwhile, demand for the 14-day deposits amounted to P346.134 billion, higher than the P310-billion offer and the P346.074 billion in tenders seen on Oct. 13.

Accepted rates for the tenor ranged from 1.7195% to 1.82%, barely moving from the 1.72% to 1.825% band seen a week ago. This caused the average rate of the two-week deposits to inch up by 0.43 bp to 1.7745% from the 1.7702% recorded in the previous auction.

The central bank has not auctioned 28-day term deposits for more than a year to give way to its weekly offerings of bills with the same tenor.

The BSP uses the term deposits and the 28-day bills to gather excess liquidity in the financial system and guide market rates.

The higher term deposit yields fetched on Wednesday was due to cautious sentiment in the market amid a continued surge in oil prices, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

Energy prices have been trending upwards to reach their multi-year highs recently due to low supply as demand picked up in economies that are gradually easing restrictions.

Reuters reported that Brent crude futures topped $86 a barrel on Monday, the highest since October 2018. Meanwhile, the US West Texas Intermediate futures reached $83.73, reaching its highest since October 2014.

Mr. Ricafort said the TDF yields also reflected the upward trend seen in the rates of Treasury bills and bonds.

The Bureau of the Treasury sold P15 billion in Treasury bills as planned on Monday. Tenders amounted to P36.088 billion, more than double the initial offer but lower than the P46.594 billion in bids seen in the prior week.

The average yields on the three-month and one-year papers increased by 1.8 bps and 1.7 bps to 1.113% and 1.604%, respectively. On the other hand, the average rate of the six-month papers slipped by 0.1 bp to 1.39%.

Meanwhile, the government rejected all bids for its offer of reissued 10-year Treasury bonds on Tuesday as investors asked for higher returns due to inflation concerns.

Had the Treasury made a full award of the bonds, which have a remaining life of five years and six months, the average yield would have jumped by 169.8 bps to 4.883%. — L.W.T. Noble with Reuters