YIELDS ON THE central bank’s term deposits ended higher on Wednesday after the government’s retail Treasury bond (RTB) offering and as the US Federal Reserve said it is open to a quicker tapering of its asset purchases.

Total bids for the term deposit facility (TDF) of the Bangko Sentral ng Pilipinas (BSP) amounted to P467.818 billion on Wednesday, lower than the P480-billion offer and P614.309 billion in tenders seen a week earlier.

Broken down, the eight-day term deposits fetched bids amounting to P181.141 billion, slightly higher than the P180 billion auctioned off by the BSP but much lower than the P258.252 billion in tenders recorded a week ago.

Accepted rates for the papers were from 1.71% to 2.19%, wider than the 1.7149% to 1.74% band recorded in the previous auction. This caused the average rate of the one-week deposits to rise by 2.7 basis points (bps) to 1.7599% from 1.7329% previously.

Meanwhile, bids for the 14-day term deposits amounted to P286.677 billion, also lower than the P300-billion offering and the P356.057 billion in tenders logged on Nov. 24.

Banks asked for yields ranging from 1.745% to 2.19%, wider than the 1.73% to 1.99 margin a week ago. With this, the average rate of the two-week papers increased by 4.31 bps to 1.8226% from 1.7795%.

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

The central bank uses the TDF and its short-term securities to gather excess liquidity in the financial system and guide market rates.

“The results of the auction continue to reflect normal market conditions, supported by ample liquidity in the financial system, amid the ongoing issuance of the retail Treasury bonds which will be settled this Thursday,” BSP Deputy Governor Francisco G. Dakila, Jr. said in a statement.

The Bureau of the Treasury (BTr) on Monday said it raised P360 billion through its offering of 5.5-year RTBs that ended last week. The government raised P330.5 billion in fresh funds while the remaining P29.5 billion was from the bond exchange program.

Proceeds from the issuance will be used to fund government pandemic-response and economic recovery programs, the BTr said.

TDF yields also inched higher due to cautious sentiment amid hawkish signals from the Fed regarding the pace of the reduction of its bond purchases, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said.

Federal Reserve Chairman Jerome H. Powell on Tuesday said they have witnessed elevated inflation pressures, strong labor market data which was not paired with better labor supply, as well as strong spending since their last policy review in November, Reuters reported.

“We are actually at our next meeting in a couple of weeks going to have a discussion about accelerating that taper by a few months,” Mr. Powell told members of the Senate Banking Committee, as reported by Reuters.

The Federal Open Market Committee will have its last policy review this year on Dec. 14 to 15. — Luz Wendy T. Noble with Reuters

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