YIELDS on the central bank’s term deposits went up on Wednesday, with the market waiting for more clues about the next policy moves of the US Federal Reserve and the Bangko Sentral ng Pilipinas (BSP) after last week’s rate hikes.

Tenders for the BSP’s term deposit facility (TDF) amounted to P299.539 billion, going beyond the P240 billion on the auction block as well as the P282.80 billion in bids for a P280-billion offering a week earlier.

Broken down, bids for the seven-day term deposits amounted to P173.232 billion, higher than the P140 billion auctioned off by the BSP and the P168.448 billion in tenders seen for the P180-billion offer last week.

Banks asked for rates ranging from 6.55% to 6.7124%, narrower than the 6.49% to 6.77% band recorded the previous week. This caused the average rate of the papers to increase by 4.11 basis points (bps) to 6.6563% from 6.6152% last week.

Meanwhile, the 14-day papers attracted bids worth P126.306 billion, higher than the P100-billion offering as well as the P114.352 billion in tenders a week ago.

Accepted rates for the tenor were from 6.572% to 6.6985%, narrower than the 6% to 6.6994% margin seen on March 22. With this, the average rate of the two-week term deposits went up by 1.84 bps to 6.6574% from 6.639% previously.

The BSP has not offered 28-day term deposits for more than two years 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 rose after the widely expected rate increases from the Fed and the BSP last week, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

“Markets recently priced in a possible +0.25 Fed rate hike or pause on the next rate-setting meeting on May 3, 2023 that could be matched locally on May 18, to maintain comfortable interest rate differentials to help stabilize the peso and overall inflation,” Mr. Ricafort added.

The Fed last week raised interest rates by 25 bps to the 4.75%-5% range, but said it could consider a pause soon due to turmoil in the US banking system. However, Fed Chair Jerome H. Powell kept the door open for further rate increases if necessary.

The US central bank has hiked rates by 475 bps since March 2022.

Meanwhile, the BSP last week increased borrowing costs by 25 bps as inflation remains elevated, bringing its key rate to 6.25%.

Since May 2022, the central bank has raised rates by a total of 425 bps.

BSP Governor Felipe M. Medalla earlier said that if March inflation eases further from February’s 8.6%, the Monetary Board may no longer raise borrowing costs at its next meeting.

March inflation data will be released on April 5. — Keisha B. Ta-asan