TERM DEPOSIT YIELDS inched up on Wednesday even as inflation hit a 20-month low in November, which may prompt the Bangko Sentral ng Pilipinas (BSP) to keep borrowing costs steady at its meeting next week.

Demand for the BSP’s term deposit facility (TDF) reached P336.436 billion on Wednesday, above the P290 billion auctioned off by the central bank and the P295.971 billion in bids for a P300-billion offering seen last week.

The BSP Auction Committee said in a statement that strong demand was observed for Wednesday’s TDF offer.

“Looking ahead, the BSP’s monetary operations will continue to be guided by its assessment of prevailing liquidity conditions and market developments,” it added. 

Broken down, bids for the one-week term deposits amounted to P178.186 billion, above the P160 billion on the auction block and the P164.686 billion in tenders logged the previous week for a P180-billion offer.

Accepted rates were from 6.65% to 6.72%, narrower than the 6.62% to 6.75% band seen a week ago. This brought the average rate of the seven-day papers to 6.6927%, increasing by 0.52 basis point (bp) from the 6.6875% quoted previously.

Meanwhile, the 14-day papers fetched bids totaling P158.250 billion, surpassing the P130 billion bid out by the central bank and the P131.285 billion for a P120-billion offer recorded on Nov. 29.

Lenders asked for yields ranging from 6.6892% to 6.6550%, higher than the 6.6886% to 6.60% margin logged a week earlier. With this, the average rate of the two-week deposits inched up by 0.06 bp to 6.6892% from 6.6886% in the prior auction.

The central bank has not auctioned off 28-day term deposits for three 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.

TDF yields were higher week on week following the release of data showing slower November inflation, as this could prompt the Monetary Board to keep borrowing costs unchanged at its last monetary policy meeting for the year on Dec. 14, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

Headline inflation eased to 4.1% in November from 4.9% in October and 8% in November 2022. This was the slowest rate in 20 months or since the 4% seen in March 2022.

It was also lower than the median estimate of 4.4% in a BusinessWorld poll of 15 analysts conducted last week and was near the lower end of the 4-4.8% forecast range of the BSP for the month.

In the first eleven months, inflation averaged 6.2%, faster than 5.6% in the same period a year ago and still above the central bank’s 2-4% target and baseline forecast of 6% for 2023.

The BSP last month kept its target reverse repurchase rate at a 16-year high of 6.5%.

The central bank has raised borrowing costs by a total of 450 bps since May 2022 to tame inflation. — K.B. Ta-asan