TDF yields slip on oil’s drop, global bond issue

YIELDS on the central bank’s term deposits inched down on Wednesday as fuel prices declined and as investors continued to price in the government’s bond issuance last month.

The term deposit facility (TDF) of the Bangko Sentral ng Pilipinas (BSP) fetched bids amounting to P480.045 billion on Wednesday, well above the P410-billion offering but declining from the P538.809 billion seen a week ago.

Broken down, tenders for the seven-day papers reached P189.303 billion, higher than the P170 billion auctioned off by the central bank but failing to beat the P211.867 billion in bids seen the previous week.

Banks asked for yields ranging from 1.85% to 1.99%, wider than the 1.85% to 1.96% band seen a week ago. This caused the average rate of the one-week deposits to decrease by 1.48 basis points (bps) to 1.9177% from 1.9325% previously.

Meanwhile, bids for the 14-day term deposits amounted to P290.742 billion, beyond the P240-billion offering but down from the P326.942 billion in tenders seen on March 31.

Accepted rates for the tenor were from 1.825% to 1.975%, lower than the 1.89% to 2% margin seen a week ago. With this, the average rate for the two-week deposits fell by 3.16 bps to 1.949% from 1.9806% logged in the prior auction.

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

The term deposits and the 28-day bills are used by the BSP to mop up excess liquidity in the financial system and to better guide market rates.

Term deposit yields went down as it tracked the downtrend in global oil prices which could partly ease inflation worries, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

Both Brent and US crude benchmarks fell by 13% on Friday from their levels a year earlier to log their biggest drop in two years as the US relayed its plans to release oil reserves to ease supply concerns amid the ongoing Russia-Ukraine war, Reuters reported.

However, oil futures were mixed during the early Wednesday session amid concerns for falling demand after Shanghai extended its lockdown and as new sanctions on Russia remains on the table.

Brent crude futures were up 11 cents or 0.1%, at $106.75 a barrel as of 0339 GMT. Meanwhile, the US West Texas Intermedia futures declined by 11 cents or 0.1% to $101.85 a barrel.

Philippine headline inflation in March accelerated to a six-month high of 4%, reflecting the impact of the surge in oil prices following Russia’s invasion in Ukraine in late February.

The BSP last month raised its inflation forecast for the year to 4.3%, already above the 2-4% target, amid the rise in oil and commodity prices.

Aside from the drop in global oil prices, Mr. Ricafort said the market continued to price in the government’s latest global bond issuance in their TDF bids.

In March, the government raised $2.25 billion from its first triple tranche dollar-denominated bond offering. — Luz Wendy T. Noble with Reuters