TDF yields inch higher as BSP keeps rates steady

YIELDS ON the term deposits auctioned off by the Bangko Sentral ng Pilipinas (BSP) mostly climbed on Wednesday following its decision to maintain benchmark rates and due to expectations of faster inflation this year.

Demand for papers under the BSP’s term deposit facility (TDF) totaled P391.67 billion on Wednesday, higher than the P270 billion on the auction block. This also surpassed the P372.23 billion in bids logged last week for the P230 billion up for grabs.

Broken down, the seven-day deposits attracted tenders amounting to P145.84 billion, beating the P110-billion offering as well as the P135.31 billion in bids recorded the prior week.

Rates for the one-week papers ranged from 1.75% to 1.88%, marginally wider than the 1.75% to 1.8% range logged in the previous week. This brought the average rate for the tenor to 1.7834%, inching up by 1.26 basis points (bps) from the 1.7708% seen on Aug. 19.

For the 14-day deposits, tenders hit P163.54 billion, going beyond the P110-billion offering and the P157.75 billion in bids last week for the P90 billion up for grabs.

Accepted yields were seen from 1.76% to 1.95%, a slimmer band compared to the 1.75% to 2% logged the previous week. This brought the average rate of the two-week deposits to 1.8317%, down by 0.3 bp from the 1.8347% logged a week ago.

On the other hand, demand for the 28-day papers amounted to P82.29 billion, surpassing the P50 billion offered by the central bank as well as the P79.17 billion in bids seen last week for the P50 billion auctioned off.

Banks asked for yields ranging from 1.7655% to 1.9518%, a narrower range compared to the 1.7532% to 2% logged a week ago. This caused the tenor’s average rate to hit 1.8481%, gaining 2.49 bps from the 1.8232% seen on Aug. 19.

“Results of Wednesday’s auction continue to show ample liquidity in the financial system,” BSP Deputy Governor Francisco G. Dakila, Jr. said in a statement.

Yields on the term deposits mostly inched higher after key rates were maintained in the fourth policy review of the Monetary Board last week, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a text message on Wednesday.

The BSP last Thursday kept the rates on its overnight reverse repurchase, lending and deposit facilities at record lows of 2.25%, 2.75%, and 1.75%.

BSP Governor Benjamin E. Diokno said the decision to go for a “prudent pause” was backed by the stable inflation and some shoots of recovery in economic activity.

Mr. Diokno said earlier this week they still have space to ease policy settings further if needed.

The central bank has already slashed rates by 175 bps so far this year to provide support to the economy and the market amid the pandemic.

“TDF yields were also slightly higher after the BSP estimated higher inflation,” Mr. Ricafort added.

The BSP on Thursday hiked its 2020 inflation forecast to 2.6% from the 2.3% it gave in its June policy review. The 2021 and 2022 forecasts were also increased to 3% (from 2.6%) and 3.1% (from 3%), respectively. All forecasts for the said years are still within the 2-4% target of the central bank.

Mr. Dakila last week said they adjusted their inflation outlook following faster-than-expected inflation in June and July. — L.W.T. Noble