Yields on term deposits mixed on policy easing bets
YIELDS on the central bank’s term deposit facility (TDF) ended mixed on Wednesday amid hawkish policy bets following faster-than-expected July inflation.
The Bangko Sentral ng Pilipinas’ (BSP) offering of term deposits fetched bids amounting to P179.018 billion on Wednesday, just short of the P180 billion on the auction block but higher than the P121.893 billion in tenders for the P250-billion offer a week ago.
Broken down, tenders for the seven-day papers reached P90.542 billion, higher than the P80 billion auctioned off by the central bank and the P51.047 billion in bids for a P120-billion offering seen the previous week.
Banks asked for yields ranging from 6.495% to 6.52%, narrower than the 6.4925% to 6.525% band seen a week ago. This caused the average rate of the one-week deposits to slip to 6.5155% from 6.5161% previously.
Meanwhile, bids for the 14-day term deposits amounted to P88.476 billion, below the P100-billion offering but higher than the P70.846 billion in tenders seen on July 31 for the P130 billion on the auction block.
Accepted rates for the tenor were from 6.53% to 6.57%, narrower than the 6.52% to 6.575% margin seen a week ago. With this, the average rate for the two-week deposits rose by 0.29 basis point (bp) to 6.5523% from 6.5494% logged in the prior auction.
The BSP has not auctioned off 28-day term deposits for more than three 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 were mixed following the release of July inflation data, which prompted slightly hawkish signals from BSP Governor Eli M. Remolona, Jr., Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
Headline inflation accelerated to a nine-month high of 4.4% in July from 3.7% in June.
This was slower than the 4.7% print in the same month a year ago and was within the BSP’s 4%-4.8% forecast for the month. However, this was higher than the 4% median estimate in a BusinessWorld poll of 15 analysts and was the fastest in nine months or since the 4.9% clip in October 2023.
The July print marked the first time since November that headline inflation exceeded the central bank’s 2-4% annual target.
The central bank is now “less likely” to cut rates at its Aug. 15 policy meeting next week following the worse-than-expected July inflation print, Mr. Remolona said on Tuesday.
The BSP chief earlier signaled that they were on track to cut rates for the first time in over three years this month, possibly by 25 bps, adding that another 25-bp cut is likely next quarter.
After next week’s review, the central bank’s remaining policy-setting meetings this year are scheduled for Oct. 17 and Dec. 19. — Luisa Maria Jacinta C. Jocson
