YIELDS ON term deposits offered by the Bangko Sentral ng Pilipinas (BSP) on Wednesday tracked US bond rates as the market waits for clarity on a planned stimulus package in the world’s largest economy.

Tenders for the central bank’s term deposit facility (TDF) amounted to P704.768 billion yesterday, above the P610 billion auctioned off by the BSP but lower than the P756.711 billion in bids logged last week.

“The sustained strong demand for the TDF reflects ample liquidity in the financial system as cash holdings continue to normalize from the previous month’s holidays,” BSP Deputy Governor Francisco G. Dakila, Jr. said in a statement on Wednesday.

Broken down, bids for the seven-day papers reached P272.499 billion yesterday, surpassing the P230 billion on offer but failing to beat the P291.491 billion  in tenders seen on Jan. 20.

Lenders asked for yields from 1.5875% to 1.64%, a lower range compared with the 1.6% to 1.65% band seen a week ago. This brought the seven-day deposits’ average rate to 1.622%, lower by 1.05 basis points (bps) from the 1.6325% quoted last week.

Meanwhile, demand for the two-week term deposits amounted to P432.269 billion, higher than the P380-billion offering but below the P465.22 billion seen at last week’s auction.

Accepted rates for the tenor ranged from 1.6% to 1.6525%, a narrower band compared with the 1.6% to 1.6743% recorded last week. This caused the average rate of the 14-day deposits to drop by 1.34 bps to 1.64% from 1.6534% previously.

The central bank did not auction off 28-day deposits for the 15th straight week. This follows the start of BSP’s weekly offerings of short-term bills with the same tenor.

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

The continued decline in the average rates of term deposits followed the movement of US Treasuries’ yields which slipped following uncertainty over the passage of a stimulus package there, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said.

US Treasury yields were mostly down in choppy trading on Tuesday, after earlier hitting three-week lows on the long end of the curve, as investors remained cautious about the size of a proposed US stimulus package, Reuters reported.

The US Federal Reserve also began its two-day policy gathering on Tuesday and will announce the results of its meeting on Wednesday. Analysts expect the Fed to stick to its dovish tone amid a persistent surge in virus cases.

In late afternoon trading, the benchmark 10-year yield slipped to 1.034%, from 1.04% late on Monday. It earlier slid to 1.026%, its lowest level since Jan. 6. — L.W.T. Noble with Reuters