TDF yields mixed on lower oil prices, rate hike bets

YIELDS on the term deposits of the Bangko Sentral ng Pilipinas (BSP) ended mixed on Wednesday as oil prices settled lower and with the market anticipating an earlier rate hike from monetary authorities.

Bids for the term deposit facility (TDF) of the central bank amounted to P312.547 billion, going beyond the P240-billion offer as well as the P296.062 billion in tenders seen a week earlier.

Broken down, tenders for the seven-day deposits amounted to P150.945 billion, going beyond the P100 billion auctioned off by the BSP and also higher than the P139.258 billion in tenders a week earlier.

Accepted rates were from 1.92% to 1.9827%, slimmer than the 1.89% to 2.0222% last week. This caused the average rate of the one-week term deposits to inch up by 0.02 basis point to 1.9599% from 1.9597% previously.

Meanwhile, the 14-day papers fetched tenders amounting to P161.602 billion, higher than the P140-billion offer as well as the P156.804 billion in bids the previous Wednesday.

Banks sought for yields ranging from 1.9% to 2.25%, narrower than the 1.925% to 2.37% margin seen on May 4. With this, the average rate of the two-week papers declined by 0.65 basis point to 2.0287% from 2.0352% in the prior auction.

“The results of the TDF auction point to a normalization in liquidity conditions amid ample supply in the financial system. Going forward, the BSP’s monetary operations will remain guided by its assessment of the latest liquidity conditions and market developments,” BSP Deputy Governor Francisco G. Dakila, Jr. said in a statement.

The BSP has not auctioned 28-day term deposits for more than a year to give way to its weekly auctions of securities with the same tenor.

Both the TDF and 28-day bills are used by the central bank to gather excess liquidity in the financial system and to better guide market rates.

Term deposit yields were mixed after global oil prices inched down, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

Reuters reported that fuel prices dropped to two-week lows at below $100 per barrel on Tuesday due to demand worries over the impact of the lockdowns in China and the growing recession risks in the US.

The US West Texas Intermediate crude declined by $3.33 or 3.2% to $99.76 a barrel on Tuesday, while the Brent crude fell $3.48 or 3.28% to $102.46 per barrel.

Mr. Ricafort said the market also factored in more hawkish signals from the BSP.

BSP Governor Benjamin E. Diokno said late April that monetary authorities might consider increasing interest rates in their June 23 meeting after assessing economic growth and labor data. He said they would want to ensure first that recovery has become entrenched before tightening policy rates.

The first-quarter gross domestic product data will be released this Thursday by the Philippine Statistics Authority.

A BusinessWorld poll of 17 analysts yielded a median estimate of 6.7% economic growth for the first quarter, which will mark the fourth straight quarter of GDP expansion. If realized, this would be slower than the 7.8% growth in the fourth quarter of 2021 but a turnaround from the 3.8% decline in the same three months last year. — Luz Wendy T. Noble with Reuters