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Term deposit yields dip ahead of BSP’s policy-setting meeting

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YIELDS on the Bangko Sentral ng Pilipinas’ (BSP) term deposit facility (TDF) dipped as the market awaits the decision of the Monetary Board’s policy-setting meeting this Thursday.

Tenders for the term deposits offered by the BSP on Wednesday hit P418.775 billion, surpassing the P170 billion auctioned off and also higher than the P360.02 billion in bids logged for the P150 billion offered last week.

The seven-day deposits recorded bids amounting to P278.475 billion, more than double the P120 billion on offer and surpassing the P268.44 billion in tenders seen on June 17 for the P120 billion on the auction block.

Banks sought yields ranging from 2.25% to 2.2505% for the one-week papers, marginally narrower than the 2.25% to 2.2508% range logged the previous week. With this, the average rate for the seven-day papers stood at 2.2504%, down by 0.01 basis point (bp) from the 2.2505% recorded last week.

For the 14-day papers, tenders totaled P140.3 billion, almost thrice as much as the P50 billion up for grabs as well as the P91.58 billion in bids seen last week.

Lenders asked for rates between 2.25% and 2.251% for the two-week term deposits, barely changed from the 2.25% to 2.252% range logged last week. This caused the average rate for the 14-day papers to settle at 2.2508%, slipping by 0.04 bp from the 2.2512% logged on June 17.

“The results of [the] auction continue to indicate very strong market interest for safe assets amid ample financial liquidity,” BSP Deputy Governor Francisco G. Dakila, Jr. said in a statement.

The TDF is the central bank’s primary tool to gather excess liquidity in the financial system and to better guide market interest rates.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the market seemed to be on the lookout for another easing move despite previous signals from the BSP that it is likely to pause this week.

“Markets have already priced in possible rate cut by the BSP for quite some time already, with TDF yields usually below the key BSP overnight [reverse repurchase] rate of 2.75%,” Mr. Ricafort said in a text message.

Ten out of 13 analysts polled by BusinessWorld expect the BSP to keep policy rates steady at its meeting today, with some of them saying the next rate cut may happen later this year, when the pandemic’s economic impact can be gauged better.

BSP Governor Benjamin E. Diokno said earlier this month they are “happy” with “where the current policy rate is” and assured the central bank still has enough ammunition when things get worse.

“Will there be a rate cut in the June to August meeting? We’re looking at it and we’re looking at information,” Mr. Diokno said in an interview with ABS-CBN News Channel on Monday.

The Monetary Board’s next scheduled meeting after June 25’s review is on Aug. 20.

The BSP has slashed rates by a total of 125 bps so far this year. This brought the overnight reverse repurchase, lending and deposit rates to record lows of 2.75%, 3.25% and 2.25%, respectively. — L.W.T. Noble





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