YIELDS on term deposits inched higher after the central bank chief said they may hike interest rates further at their next policy setting.

Demand for the term deposit facility (TDF) of the Bangko Sentral ng Pilipinas (BSP) amounted to P295.251 billion, above the P280-billion offer and the P276.096 billion in tenders for a P280-billion offer recorded last week.

Broken down, bids for the seven-day term deposits amounted to just P146.065 billion, lower than the P170 billion auctioned off by the BSP. It also failed to beat the P169.326 billion in tenders for the P150-billion offering a week earlier.    

Accepted rates ranged from 4.65% to 5%, higher than the 4.58% to 4.8398% margin in the prior auction. With this, the average rate of the one-week papers rose by 10.53 basis points (bps) to 4.8146% from 4.7093% previously.

Meanwhile, the 14-day papers attracted P149.186 billion in bids, more than the P110-billion offering. Demand also rose from the P106.770 billion in tenders for the P130-billion offer seen on Oct. 19.

Banks asked for yields from 4.55% to 5%, narrower than the 4.48% to 5.2125% band a week prior. This caused the average rate of the two-week term deposit to increase by 14.33 bps to 4.9044% from 4.7611%.

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 TDF and the 28-day bills are used by the BSP to mop up excess liquidity from the financial system and to better guide market rates.

“The results of the TDF auction reflect the market participants’ preference for the longer tenor in the BSP deposit facility ahead of All Souls’ Day holiday amid ample liquidity in the financial system,” BSP Deputy Governor Francisco G. Dakila, Jr. said in a statement on Wednesday.

“Going forward, the BSP’s monetary operations will remain guided by its assessment of the latest liquidity conditions and market developments,” he added.

Yields on the term deposit were higher again this week as the BSP chief hinted at another big rate hike next month, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

BSP Governor Felipe M. Medalla on Tuesday said the central bank could match the Federal Reserve point by point to support the peso and prevent it from further adding to inflation.

Mr. Medalla said the Monetary Board could raise benchmark interest rates by 75 bps at their Nov. 17 meeting if the Fed delivers a hike of the same magnitude at their Nov. 1-2 review.

The BSP has so far raised key rates by 225 bps since May to tame inflation and support the peso to prevent its depreciation from feeding into price pressures. Meanwhile, the Fed has hiked borrowing costs by 300 bps since March.

Philippine headline inflation quickened to 6.9% in September, bringing the nine-month average to 5.1%, above the BSP’s 2-4% target but still below its 5.6% forecast for 2022. — Keisha B. Ta-asan