Term deposit yields inch down on slower inflation, Fed move

YIELDS on the central bank’s term deposits inched down on Wednesday following slower inflation and the US Federal Reserve’s commitment to stay accommodative.

Demand for the term deposit facility (TDF) of the Bangko Sentral ng Pilipinas (BSP) was at P560.497 billion on Wednesday, surpassing the P520-billion offering but failing to beat the P641.782 billion in bids a week earlier.

Broken down, the seven-day deposits fetched bids amounting to P204.327 billion, higher than the P180 billion on the auction block but lower than the P247.573 billion worth of tenders logged the previous week.

Accepted rates for the tenor ranged from 1.7% to 1.76%, a tad narrower than the 1.7% to 1.7716% band logged in last week’s auction. This caused the average rate of the paper to drop by 1 basis point (bp) to 1.7421% from 1.7521% previously.

Meanwhile, the 14-day papers saw bids amounting to P356.17 billion, surpassing the P340-billion offer but less than the P394.209 billion logged a week ago.

Banks asked for yields ranging from 1.74% to 1.85%, wider than the 1.75% to 1.7875% margin seen on Nov. 3. With this, the average rate of the two-week term deposits slipped by 0.6 bp to 1.7636% from 1.7696% a week ago.

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

Yields on the term deposits declined on Wednesday after inflation eased in October, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said.

Headline inflation in October was at a three-month low at 4.6%, easing from the 4.8% in September. It was also slower than the 4.9% median estimate of 21 analysts in a BusinessWorld poll.

However, inflation remains beyond the 2-4% target set by the BSP. The October consumer price index outturn brought year-to-date inflation to 4.5%, also quicker than the 4.4% estimate of the BSP for the year.

The Philippine Statistics Authority said slower increase in food prices caused the slight easing in inflation last month.

BSP Governor Benjamin E. Diokno has said they are ready to keep an accommodative stance to support economic recovery as long as inflation remains manageable.

Meanwhile, Mr. Ricafort said the market also took into account the Fed’s policy announcements.

The Fed last week announced it will start reducing its monthly purchase of Treasury assets, but kept the policy rates near zero. Fed Chairman Jerome H. Powell said they will stay patient to support recovery while the labor market remains weak. — Luz Wendy T. Noble