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Term deposit yields inch higher as bids decline

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TERM DEPOSIT yields were marginally higher on Thursday amid lower bids during the holiday season and following the release of official data which showed a wider budget deficit in November.

Tenders for the central bank’s term deposit facility (TDF) amounted to P108.927 billion on Thursday, lower than the P130 billion on offer, according to data from the Bangko Sentral ng Pilipinas (BSP).

This week’s tenders also failed to beat the P165.274 billion in bids the BSP received last week for the P150 billion on the auction block.

Banks’ tenders for the seven-day term papers totaled P40 billion, failing to fill the P50 billion auctioned off by the central bank and also lower than the P73.831 billion in bids seen on Dec. 18 for the P60-billion offer.

Yields for the one-week term deposits ranged from 4.18% to 4.35%, a wider margin compared to last week’s 4.2-4.35%. This resulted in an average rate of 4.2776%, increasing by 0.72 basis point (bp) from last week’s 4.2724%.

Meanwhile, tenders for the 13-day deposits stood at P29.089 billion, lower than the P50 billion on offer and also down from the P41.519 billion worth of bids on Dec. 18.

Banks asked for returns from 4.3% to 4.4%, a thinner band compared to the 4.2% to 4.4099% range last week. The average rate for the two-week deposits was at 4.3337%, inching up by 0.49 bp from the 4.3288% logged last week.

On the other hand, tenders for the 27-day deposits came in at P39.838 billion, lower than the P40 billion offered by the central bank and also down from the P49.924 billion in bids seen last week.

The one-month papers fetched rates ranging 4.2850% to 4.4750%, a narrower band compared to the 4.27% to 4.4125% margin seen on Dec. 18. This resulted in an average rate of 4.3542%, inching up by 1.06 bp from last week’s 4.3436%.

Economists pointed out that the lower bids due to the holidays caused rates to go up.

“Substantial undersubscription afforded players scope to bid up rates across tenors. With business activity winding down, funds may have been parked previously in tenors crossing the year,” ING Bank NV-Manila Senior Economist Nicholas Antonio T. Mapa said in an e-mail.

“BSP TDF auction yields were slightly higher lower bids due to the Christmas and New Year holidays, and some window-dressing activities that lead to some temporary premium in crossing-the-year/short-term funds as the accounting year-end draws closer,” Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp. said in an e-mail.

“Wider budget deficit data amid faster growth in government spending for the month of November may have also partly caused the slight uptick in the latest BSP TDF auction yields,” he added.

On Monday, the Bureau of the Treasury (BTr) said the fiscal gap widened by 55.64% year on year to P60.9 billion in November from the P39.1-billion deficit posted a year ago.

Government spending jumped by 22.36% to P365.6 billion in November from P298.8 billion a year ago, marking its fastest pace of growth since a 39% hike recorded in September.

According to the BTr, the government’s plan to catch up with its spending program was evident in last month’s increase, which brought year-to-date state spending to P3.3 trillion, up 6.73% year on year. — Luz Wendy T. Noble

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