YIELDS on the central bank’s term deposits inched down on Wednesday after headline inflation eased to a six-month low.
The term deposit facility (TDF) of the Bangko Sentral ng Pilipinas (BSP) attracted bids amounting to P364.717 billion on Wednesday, well above the P230 billion on the auction block as well as the P299.538 billion seen a week ago for a P240-billion offer.
Broken down, tenders for the seven-day papers reached P213.053 billion, higher than the P130 billion auctioned off by the central bank and the P173.232 billion in bids for a P140-billion offer seen the previous week.
Banks asked for yields ranging from 6.5% to 6.6655%, lower than the 6.55% to 6.7124% band seen a week ago. This caused the average rate of the one-week deposits to decrease by 2.04 basis points (bps) to 6.6359% from 6.6563% previously.
Meanwhile, bids for the 14-day term deposits amounted to P151.664 billion, above the P100-billion offering and the P126.306 billion in tenders seen on March 29.
Accepted rates were from 6.5% to 6.6772%, lower than the 6.572% to 6.6985% margin recorded a week ago. With this, the average rate for the two-week deposits inched down by 1.09 bps to 6.6465% from 6.6574% logged in the prior auction.
The BSP bank has not auctioned off 28-day term deposits for more than two years 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 inflation eased in March, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
Preliminary data from the Philippine Statistics Authority (PSA) released on Wednesday showed headline inflation eased to 7.6% from 8.6% in February. Still, this was significantly higher than the 4% print a year ago.
March inflation was the slowest since the 6.9% print in September 2022. This was below the 8.1% median in a BusinessWorld poll conducted last week and near the lower end of the 7.4-8.2% forecast of the BSP for March.
However, price pressures remained high as core inflation climbed to 8% from 7.8% in February. This is its highest clip since 8.2% in December 2000.
For the first quarter, the consumer price index settled at 8.3%, higher than the central bank’s full-year forecast of 6% and the 2-4% target band.
BSP Governor Felipe M. Medalla last month said if inflation comes out better than expected in March and April, the Monetary Board may consider pausing its rate hike cycle at its May 18 meeting.
The BSP has raised benchmark interest rates by 425 bps since May last year, bringing its key rate to a near 16-year high of 6.25%.
Mr. Ricafort said expectations of a 25-bp hike or pause from the US Federal Reserve in its next meeting on May 2-3 were also priced in by investors.
The US central bank increased the fed funds rate by 25 bps to 4.75-5% last month. The Fed has now raised 475 bps since March 2022. — Keisha B. Ta-asan