YIELDS on the central bank’s term deposits went down on Wednesday amid hawkish signals from the Bangko Sentral ng Pilipinas (BSP) and the US Federal Reserve.

The term deposit facility (TDF) of the BSP fetched bids amounting to P421.104 billion on Wednesday, well above the P350-billion offering but lower than the P434.066 billion in tenders for the P300-billion offer a week ago.

Broken down, tenders for the seven-day papers reached P231.567 billion, higher than the P200 billion auctioned off by the central bank but lower than the P263.423 billion in bids for a P180-billion offering seen the previous week.

Banks asked for yields ranging from 6.37% to 6.4895%, slimmer than the 6.3% to 6.515% band seen a week ago. This caused the average rate of the one-week deposits to decrease by 1.27 basis points (bps) to 6.4449% from 6.4576% previously.

Meanwhile, bids for the 14-day term deposits amounted to P189.537 billion, above the P150-billion offering and the P170.643 billion in tenders for the P120-billion offer on Sept. 20.

Accepted rates for the tenor were from 6.39% to 6.4913%, narrower than the 6.3275% to 6.525% margin seen a week ago. With this, the average rate for the two-week deposits slipped by 2.14 bps to 6.4649% from the 6.4863% logged in the prior auction.

The BSP 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 central bank to mop up excess liquidity in the financial system and to better guide market rates.

Term deposit yields went down due to hawkish signals from both the BSP and the Fed, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

BSP Governor Eli M. Remolona, Jr. told Bloomberg on Monday that he is open to an off-cycle rate hike before their Nov. 18 meeting and also ruled out cuts in the near term.

The central bank kept rates unchanged for a fourth straight meeting last week, but signaled it might resume tightening at its meeting in November if inflation pressures persist.

The Monetary Board kept its target reverse repurchase rate at 6.25%. Interest rates on the overnight deposit and lending facilities were also left unchanged at 5.75% and 6.75%, respectively.

Meanwhile, Chicago Fed President Austan Goolsbee said on Monday that inflation staying entrenched above the central bank’s 2% target remains a bigger risk than tight Fed policy slowing the economy more than needed, Reuters reported.

Minneapolis Fed President Neel Kashkari said more rate hikes are likely needed given the surprising resilience of the US economy.

The Fed last week kept its target rate unchanged at the 5.25% to 5.5% range.

It has hiked rates by a cumulative 525 bps since it began its tightening cycle in March last year. — AMCS with Reuters

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