Yields on BSP’s term deposits inch higher on faster inflation

YIELDS ON THE term deposits offered by the Bangko Sentral ng Pilipinas (BSP) rose slightly on Wednesday as bids declined following the release of the July inflation data.

Tenders for the BSP’s term deposit facility (TDF) amounted to P526.49 billion on Wednesday, well beyond the P380-billion offering. However, this was lower than the P549.345 billion in bids seen last week for the P360 billion up for grabs.

The one-week papers attracted bids amounting to P196.23 billion, surpassing the P140-billion offering and the P214.785 billion in bids seen last week.

Accepted yields for the seven-day tenor ranged from 1.75% to 1.756%, a slightly slimmer margin than the 1.75% to 1.7564% band logged on July 29. With this, the average rate for the papers settled at 1.7542%, inching up by 0.07 basis point (bp) from last week’s 1.7535%.

For the 14-day term deposits, tenders totaled P247.365 billion, higher than the P180 billion auctioned off and also the P210.68 billion in bids last week for the P140 billion offered by the central bank.

Lenders asked for returns ranging from 1.75% to 1.77%, a wider margin than the 1.75% to 1.762% logged a week ago. This caused the average rate for the two-week deposits to settle at 1.7566%, rising by 0.23 bp from the 1.7543% recorded in the previous auction.

Meanwhile, bids for the 28-day tenor reached P82.895 billion, above the P80-billion offering but down from the P123.88 billion in tenders seen the previous week for the P80 billion on the auction block.

Yields on the one-month deposits ranged from 1.75% to 1.799%, a tad wider than the 1.75% to 1.798% band last week, bringing the average rate to 1.7655%, up by 0.61 bp from the 1.7594% recorded a week ago, central bank data showed.

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

Yields were marginally higher after “faster-than-expected inflation data,” said Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort.

Headline inflation picked up to 2.7% in July from the 2.5% in June and the 2.4% in the same month last year, the Philippine Statistics Authority reported on Wednesday. The faster rise in prices was mainly on the back of higher transport costs.

The 2.7% headline print was closer to the upper end of the 2.2-3% estimate given by the BSP and a tad faster than the 2.6% median in a BusinessWorld poll of 16 analysts last week.

The July rate put the year-to-date average at 2.5%, within the central bank’s 2% to 4% target and 2.3% forecast for 2020. — L.W.T. Noble