Yields on term deposits slip on holiday flows

TERM DEPOSIT yields slipped on the first week of the year on the back of some holiday fever and the stronger performance of the peso in 2019.

Bids for the central bank’s term deposit facility (TDF) amounted to P153.434 billion on Thursday, going beyond the P90 billion on offer, according to data from the Bangko Sentral ng Pilipinas (BSP).

This week’s tenders also beat the P108.927 billion in bids the BSP received on Dec. 26 for the P130 billion on the auction block.

“The adjustment in the total offer volume takes into account the increased demand for currency following the New Year holiday,” it said in a statement on Thursday.

Banks’ tenders for the six-day deposits amounted to P48.605 billion, going beyond the P30 billion auctioned off by the central bank and also higher than the P40 billion worth of bids seen last week.

Yields for the one-week papers clocked in from 4.2% to 4.25%, a slimmer band compared to last week’s 4.2-4.35%. This resulted in an average rate of 4.2345%, slipping by 4.31 basis points (bps) from last week’s 4.2776%.

Meanwhile, tenders for the two-week deposits hit P49.172 billion, surpassing the P30 billion offered by the central bank and also higher than the P29.089 worth of bids seen on Dec. 26 against the P40 billion up for grabs.

Lenders asked for rates from 4.28% to 4.325%, a slightly narrow band compared to the 4.3% to 4.4% range last week. The average rate for the 13-day term deposits was at 4.3045%, down by 2.92 bps from the 4.3337% logged last week.

On the other hand, tenders for the 27-day papers hit P55.657 billion, higher than the P30 billion offered by the central bank and also beating the P39.838 billion in bids seen last week for a P40-billion offer.

The one-month papers fetched rates ranging 4.295% to 4.35%, a narrower range compared to the 4.285% to 4.475% margin seen on Dec. 26. This caused its average rate to settle at 4.3302%, slipping by 2.04 bps from the previous auction’s 4.3542%.

Economists said the lower TDF yields came on the back of the stronger peso and the recently concluded holidays, among others.

“It’s a short trading week and a lot of people are still on holiday mode. Little market activity is expected and this may be one of the reasons why yields have been low,” UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said in an e-mail.

The holidays may have partly caused premium easing for short-term funds “since accounting year-end and any accompanying window-dressing activities are already done with,” according to Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort.

Aside from this, Mr. Ricafort said the peso’s performance last year may have also pushed yields down.

“Relatively stronger peso exchange rate versus the dollar, among the strongest in nearly two years, also led to lower local interest rates, including BSP TDF auction yields, as stronger peso tempers any expected uptick in the headline inflation rate,” he said in an e-mail.

The peso closed at P50.685 on Thursday, weaker by five centavos from the P50.635 close on Friday last week — which was the last trading day of 2019. The peso gained P1.945 year on year from its close of P52.58 on Dec. 28, 2018.

Economists have said the peso may weaken anew in 2020 on the back of a possibly wider trade deficit and as investors wait on the sidelines for clarity about some business-related rules in the country. — Luz Wendy T. Noble