YIELDS ON term deposits offered by the Bangko Sentral ng Pilipinas (BSP) rose on Wednesday ahead of the US elections where investors expect the Democrats to win the presidency.

Demand for the BSP’s term deposit facility (TDF) stood at P552.97 billion on Wednesday, surpassing the P490-billion offering as well as the P518.88 billion in tenders seen last week.

Broken down, tenders for the one-week papers totaled P227.445 billion, above the P220 billion on the auction block as well as the P225.955 billion in bids  logged a week ago.

Banks asked for yields ranging from 1.83% to 2.05%, barely moving from the 1.835% to 2% range seen during the Oct. 21 offering. This caused the average rate of the seven-day deposits to settle at 1.9373%, higher by 5.6 basis points (bps) from the 1.8813% logged last week.

Meanwhile, the 14-day term deposits attracted bids worth P325.525 billion, higher than the P270-billion offering as well as the P292.925 billion in tenders seen at last week’s auction.

The two-week papers fetched rates ranging from 1.85% to 2.1975%, a narrower margin compared with the 1.835% to 2.24% band last week. This caused the average rate for the tenor to settle at 2.0337%, climbing by 12.86 bps from the 1.9051% seen a week ago.

For the third week in a row, the BSP did not offer 28-day term deposits. This follows the start of the central bank’s weekly auction of its own bills with the same tenor.

The TDF and the BSP’s securities are among the central bank’s main tools to gather excess liquidity in the financial system and to better guide market interest rates.

“[The] TDF auction results show that financial liquidity remains ample ahead of the All Souls’ Day holiday. Moving forward, the BSP’s monetary operations will continue to be conducted based on its assessment of market developments and liquidity conditions,” BSP Deputy Governor Francisco G. Dakila, Jr. said in a statement.

The higher TDF yields came as markets factored in the possible victory of Joseph R. Biden in the US presidential election, said Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort, which could push up local rates.

“[A] possible victory by Democrats could entail more stimulus, government spending, budget deficits, and borrowings by the US government and more supply of bonds that lead to higher bond yields and lower bond prices,” Mr. Ricafort said in a text message.

The US presidential election is set on Nov. 3, with more than 70 million Americans that have already cast ballots as of Tuesday based on the US Elections Project, Reuters reported.

Mr. Biden has enjoyed a consistent lead over President Donald Trump, investors have been cautiously betting on his victory and possibly a “blue wave” outcome, where Democrats take back the Senate as well.

Still, the presidential race is closer in battleground states that could determine the outcome, leaving many investors on edge.

Aside from the US presidential race, yields likewise went up on window-dressing, Mr. Ricafort said.

“Peso funding rates also tend to go up as the accounting year-end draws closer, about a little over two months to go,” he said. — L.W.T. Noble with Reuters

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