YIELDS on the term deposits of the Bangko Sentral ng Pilipinas (BSP) inched higher on Wednesday, with market players positioning ahead of an expected hike from the US Federal Reserve.

Total demand for the term deposit facility (TDF) of the central bank amounted to P319.649 billion on Wednesday, below the P330-billion offering but higher than the P281.481 billion in bids for a P300-billion offer a week ago.

Broken down, tenders for the seven-day papers reached P187.453 billion, lower than the P190-billion auctioned off by the BSP as well as the P149.549 billion in bids for a P170-billion offering seen in the previous week.

Banks asked for yields ranging from 6.4995% to 6.63%, a narrower band than the 6.4% to 6.62% seen a week ago. With this, the average rate of the one-week term deposit inched up by 0.54 basis point (bp) to 6.5952% from 6.5898% previously.

Meanwhile, the 14-day papers fetched bids amounting to P132.196 billion, failing to beat the P140-billion offer but above the P131.932 billion in tenders for a P130-billion offering logged a week ago.

Accepted rates for the tenor were from 6.4995% to 6.65%, wider than the 6.54% to 6.645% range seen last week. This caused the average rate of the two-week papers to increase by 0.64 bp to 6.6159% from 6.6095% in the prior auction.

The central bank has not offered 28-day term deposits for more than two years to give way to its weekly auctions of securities with the same tenor.

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

TDF yields rose ahead of an expected rate hike from the US Federal Reserve, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The Federal Open Market Committee is widely expected to fire off another rate hike at its May 2-3 review following the 25-bp increase it made in March, before keeping rates steady for the rest of the year, according to economists in a Reuters poll.

St. Louis Fed President James B. Bullard has also said in an interview with Reuters last week that a much higher peak policy rate is needed as inflation remains stubbornly high.

The US central bank has hiked borrowing costs by a total of 475 bps since March 2022, with the fed funds rate now at a range between 4.75% and 5%.

The 25-bp rate hike from the Fed may still be followed by the BSP, but a pause in local policy rates is also possible at their meeting this month amid easing inflation, Mr. Ricafort added.

The Monetary Board has raised borrowing costs by 425 bps since May last year, bringing the policy rate to 6.25%, the highest in nearly 16 years.

The BSP will meet to discuss policy on May 18.

BSP Governor Felipe M. Medalla earlier said that the Monetary Board may consider pausing its tightening cycle at its meeting this month if inflation eased further in April.

A BusinessWorld poll of 14 analysts yielded a median estimate of 7% for April inflation, near the upper end of the 6.3-7.1% forecast range of the BSP for the month.

If realized, this would be slower than the 7.6% in March, but faster than the 4.9% in April 2022. It will also be the slowest rise in prices in seven months, or since the 6.9% inflation rate in September last year.

April inflation data will be released on May 5. — Keisha B. Ta-asan with Reuters