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Term deposit yields inch higher as BSP halts monetary easing

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The central bank’s term deposits fetched higher yields.

YIELDS on term deposits inched up on Wednesday as markets anticipate a pause in the central bank’s monetary easing after successive rate cuts this year.

Bids for the Bangko Sentral ng Pilipinas’ (BSP) term deposit facility (TDF) totalled P160.179 billion, slightly above the P160 billion placed for auction, central bank data showed.

This also surpassed the P127.606 billion in bids the BSP received last week for the P120 billion on the auction block.

Tenders for the seven-day notes hit P48.058 billion, higher than the P40 billion on offer and also going beyond last week’s P45.668 billion worth of bids.

Accepted yields for the tenor ranged from 4.15% to 4.45%, a wider band compared to last week’s 4.125% to 4.225%. This resulted in an average rate of 4.2264%, 3.41 basis points (bp) higher than last week’s 4.1923%.

Meanwhile, the 14-day papers lured bids worth P57.8 billion, beyond the P50 billion on offer and also higher compared to the P41.165 billion in tenders seen last week versus the P40-billion offer.

Lenders asked for returns ranging from 4.2% to 4.425%, a slightly narrower range versus the 4.15-4.45% band seen a week earlier. The average rate for the two-week papers climbed to 4.3184%, 8.48 bps higher than last week’s 4.2336%.

On the other hand, the 28-day deposits received tenders totalling P54.321 billion, beyond the P40-billion offering as well as the P40.773 billion in bids seen last week for the BSP’s P40-billion program.

Rates for the one-month tenor ranged from 4.25% to 4.4730%, thinning from the previous auction’s margin of 4.18-4.5%. This brought the one-month paper’s average yield to 4.3597%, 4.75 bps higher than last week’s 4.3122%.

The TDF is the BSP’s main tool to shore up excess liquidity in the financial system and to better guide market interest rates.

According to analysts, the higher yields came as the central bank signalled that it will pause its monetary easing cycle.

“We do know that the BSP has cut both RRR (reserve requirement ratio) and RRP (reverse repurchase rate) rates, obviously an easing trend, this year. The higher yields may also mean that the BSP is really in a “pause” with regard to further easing rates, either or both RRR or RRP,” UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said in an email.

“TDF auction yields were higher amid market expectations that local policy rates would be kept unchanged on monetary policy-setting meeting as also signalled recently by some local monetary policy officials and also due to expectations that local inflation already bottomed out in October 2019 at a 3.5-year low of 0.8%,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a separate email.

BSP Governor Benjamin E. Diokno told ANC and Bloomberg earlier this month that the central bank is done cutting rates for this year. The Monetary Board holds its policy meeting today.

Mr. Diokno also said current monetary policy “remains appropriate” as the “economy is back on track to a strong growth path” following the release of data showing gross domestic product growth of 6.2% in the third quarter.

The BSP has cut benchmark interest rates by 75 basis points this year, partially dialling back the 175-bp in hikes implemented in 2018 amid an elevated inflation environment. — Luz Wendy T. Noble





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