YIELDS on the central bank’s term deposits ended mixed on Wednesday after the US Federal Reserve hinted on a rate hike next month and amid expectations of a slower headline inflation print in January.

Demand for the term deposit facility (TDF) of the central bank reached P620.911 billion, surpassing the P550-billion offer but lower than the P651.558 billion in bids a week earlier.

Broken down, tenders for the seven-day term deposits amounted to P225.761 billion, higher than the P220 billion auctioned off by the BSP but failing to beat the P240.097 billion in bids logged last week.

Banks asked for rates ranging from 1.61% to 2.19%, lower but slightly narrower than the 1.665% to 2.25% band recorded the previous Wednesday. This caused the average rate of the papers to increase by 1.86 basis points (bps) to 1.7413% from 1.7227% last week.

Meanwhile, the 14-day papers fetched bids worth P395.15 billion, higher than the P330-billion offering but lower than the P411.461 billion in tenders a week ago.

Accepted rates for the tenor were from 1.605% to 1.71%, slimmer than the 1.5% to 1.7175% margin seen last week. With this, the average rate of the two-week term deposits slipped by 0.73 bp to 1.6899% from 1.6972%

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

The term deposit facility and the one-month securities are used by the BSP to gather excess liquidity in the financial system and to better guide market rates.

TDF yields were mixed as the market priced in the Fed’s signal of a rate hike soon, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

After their policy review last week where rates were kept, Fed Chairman Jerome H. Powell said the US central bank was likely to begin hiking interest rates in March to tame runaway inflation, Reuters reported.

Mr. Ricafort said the market also considered expectations of slower inflation last month.

A BusinessWorld poll of 16 analysts held last week yielded a median estimate of 3% for January inflation, citing favorable base effects which may have offset the rise in oil prices and the impact of Typhoon Odette on food supply.

If realized, inflation will be within the 2-4% target of the BSP for the second straight month and will be easing from the 3.6% print in December.

The Philippine Statistics Authority will report the January consumer price index on Friday. It will be the first time that 2018 will be used as the base year from 2012 previously. — L.W.T. Noble