YIELDS on the Bangko Sentral ng Pilipinas’ (BSP) term deposits inched up on Wednesday ahead of the retail Treasury bond (RTB) offering and following the release of the quicker-than-expected June inflation data.

Tenders for the BSP’s term deposit facility (TDF) on Wednesday totaled P483.207 billion, almost double the P250 billion up for grabs. This is also higher than the P441.631 billion in bids logged on July 1 for the P210 billion auctioned off by the BSP.

The seven-day papers fetched tenders amounting to P211.7 billion, surpassing the P120 billion on the auction block but failing to surpass the P232.3 billion recorded last week.

Yields on the one-week deposits ranged from 1.75% to 1.7625%, a slimmer margin versus the 1.75% to 1.79% margin seen on July 1. This caused the average rate for the one-week papers to settle at 1.7538%, inching down from the 1.7573% a week ago.

For the 14-day papers, bids reached P172.245 billion, surpassing the P90 billion up for grabs and the P149.68 billion in bids seen on July 1 for the P70 billion offered by the BSP.

Lenders sought returns between 1.75% and 1.7644% for the two-week term deposits, a narrower margin compared to the 1.75% to 1.78% recorded last week. This caused the average rate for the 14-day papers to settle at 1.7548%, higher by 0.26 basis point (bp) from the 1.7522% recorded on July 1.

On the other hand, the 28-day deposits attracted bids amounting to P99.262 billion, higher than the P40 billion on offer but lower than the P232.3 billion in tenders seen last week against the P120 billion on the auction block.

Rates for the one-month papers ranged from 1.75% to 1.77%, a slimmer band versus the 1.75% to 1.79% logged on July 1. The average rate for the 28-day deposits stood at 1.7578%, rising by 0.16 bp from the 1.7562% seen a week ago.

The TDF is the central bank’s primary tool to mop up excess liquidity in the financial system to better guide market interest rates.

“The results of the auction reflect continued strong market interest for the BSP’s deposit facilities, with preference toward longer-tenor TDF, amid ample liquidity conditions in the financial system,” BSP Department of Economic Research Director Dennis D. Lapid said in a statement.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the slightly higher rates for term deposits came ahead of the government’s RTB offer next week as well as the faster-than-expected inflation data.

“BSP TDF auction yields were mostly slightly higher ahead of the RTB offering next week that could somewhat take away some of the excess peso liquidity,” he said in a text message.

“The higher-than-expected inflation data also caused the latest slight uptick in most TDF auction yields,” Mr. Ricafort added.

The Treasury will offer retail bonds starting July 16.

Meanwhile, the Philippine Statistics Authority on Tuesday reported that June inflation was at 2.5%, slower than the 2.7% logged a year ago but faster than the 2.1% in May amid higher fuel, food and transport prices. It was closer to the higher end of the 1.9-2.7% estimate by the BSP but was still within the 2-4% target for the year. — L.W.T. Noble

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