TDF yields mixed ahead of BSP review

YIELDS ON term deposits offered by the Bangko Sentral ng Pilipinas (BSP) ended mixed on Wednesday as the market awaited for the central bank’s latest policy decision.

Bids for the central bank’s term deposit facility (TDF) amounted to P645.585 billion on Wednesday, higher than the P500-billion offering as well as the P622.436 billion in tenders seen a week ago.

Broken down, the seven-day papers attracted tenders worth P230.855 billion, surpassing the BSP’s P190-billion offering as well as the P225.195 billion in bids logged a week ago for the P180 billion on the auction block.

Accepted yields for the one-week deposits ranged from 1.945% to 2.0095%, a slimmer band compared to the 1.9% to 2.027% margin recorded in the previous auction. This caused the average rate of the tenor to settle at 1.9813%, rising by 0.93 basis point (bp) from the 1.972% logged last week.

Meanwhile, demand for the two-week term deposits reached P414.73 billion yesterday, above the P310 billion auctioned off on Wednesday as well as the P397.241 billion worth of tenders seen for the P300-billion offering a week ago.

Banks asked for yields ranging from 1.9% to 2.0455%, a narrower margin against the 1.875% to 2.084% band logged at last week’s auction. This brought the 14-day paper’s average rate to 1.9984%, down by 1.54 bps from the 2.0138% seen on Nov. 11.

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

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

TDF yields were mixed ahead of the central bank’s sixth policy meeting on Thursday, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in an e-mail on Wednesday.

Benchmark interest rates will likely be maintained by the BSP on Thursday, with the financial system seeing excess liquidity and an anticipated pickup in state spending, analysts said.

In a BusinessWorld poll held last week, 11 out of 16 analysts said the Monetary Board (MB) will likely continue the “prudent pause” at its sixth policy meeting on Nov. 19.

The BSP has slashed rates by 175 bps so far this year, bringing the rates of its overnight reverse repurchase, lending, and deposit facilities to record lows of 2.25%, 2.75%, and 1.75%, respectively.

“The mixed TDF auction results also came after the recent typhoon damage that could lead to some temporary rise in inflation amid damage to some agriculture supplies and other damage to property and infrastructure,” Mr. Ricafort added.

Crop damage due to Typhoon Ulysses (international name: Vamco) reached P3.84 billion, the Agriculture department said on Wednesday.

Headline inflation stood at 2.5% in October, picking up from the 2.3% pace the month before.

The October inflation result marked the fastest pace in three months or since the 2.7% reading in July 2020.

Year to date, inflation settled at 2.5%, still within the BSP’s 2-4% target this year, but above the 2.3% forecast for the entire year. — L.W.T. Noble