YIELDS on the term deposit facility (TDF) of the Bangko Sentral ng Pilipinas (BSP) continued to rise on Wednesday ahead of the Monetary Board’s policy-setting meeting.

Total bids for the central bank’s term deposits reached P431.937 billion, going above the P330-billion offer for this week. This is higher than the P323.399 billion in tenders seen last week for a P260-billion offer.

“The BSP raised the volume offering for the TDF auction to P330 billion (from P260 billion),” BSP Deputy Governor Francisco G. Dakila, Jr. said in a statement on Wednesday.

“Based on actual bids received last week, the total offer volume was reallocated between the 7-day and 14-day tenors at P190 billion (from P140 billion) and P140 billion (from P120 billion), respectively,” he added.

Broken down, the seven-day papers fetched bids amounting to P309.542 billion, higher than the P190 billion auctioned off by the BSP and the P175.765 billion in tenders logged in the previous auction, where the BSP offered P140 billion.

Banks asked for yields ranging from 6.25% to 6.378%, a lower margin compared with the 6.2975% to 6.4% band seen a week ago. This caused the average rate of the one-week paper to inch up by 0.79 basis point (bp) to 6.3559% from 6.348% a week prior.

Meanwhile, demand for the 14-day term deposits amounted to P122.395 billion, below the P140-billion offering. This was also lower than P147.634 billion in tenders recorded a week ago for a P120-billion offer.

Accepted rates for the papers were from 6.2508% to 6.48%, wider than the 6.25% to 6.3995% range seen on Feb. 8. With this, the average rate of the two-week deposit rose by 1.48 bps to 6.3802% from 6.3654% in the previous week’s auction.

The central bank has not auctioned 28-day term deposits for more than two years to give way to its weekly offering 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.

“The results of the TDF auction reflected strong demand for the shorter tenor with the BSP’s policy meeting slated for Feb. 16. Moving forward, the BSP’s monetary operations will remain guided by its assessment of the latest liquidity conditions and market developments,” Mr. Dakila said.

Yields on the term deposits were higher ahead of the widely expected BSP rate hike on Thursday, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort likewise said in a Viber message.

The Philippine central bank is widely expected to deliver another rate increase on Thursday after inflation hit a fresh 14-year high in January.

A BusinessWorld poll last week showed 17 out of 18 analysts expect the Monetary Board to raise its benchmark interest rate at its Feb. 16 meeting.

Nine analysts believe the central bank will deliver a hike of 50 bps, while eight analysts see a 25-bp increase. One analyst expects the BSP to keep rates unchanged.

The rate hike of at least 25 bps would mirror the US Federal Reserve’s tightening and could help better manage inflation and inflation expectations, Mr. Ricafort said.

Latest data from the statistics agency showed the consumer price index climbed 8.7% year on year in January, faster than 8.1% in December 2022. It was the 10th consecutive month that inflation exceeded the BSP’s 2-4% target range for the year.

To fight inflation, the Monetary Board has raised borrowing costs by 350 bps since May 2022, bringing the policy rate to a 14-year high of 5.5%.

Meanwhile, the Fed raised its target interest rate by 25 bps earlier this month. The rate hikes delivered by the US central bank since March 2022 have now totaled 450 bps, with the fed funds rate now in a range between 4.5% and 4.75%. — Keisha B. Ta-asan