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Term deposit yields mixed on GDP

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BSP
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YIELDS ON term deposits offered by the Bangko Sentral ng Pilipinas (BSP) ended mixed on Wednesday following the release of third-quarter gross domestic product (GDP) data.

Demand for the central bank’s term deposit facility (TDF) reached P622.436 billion on Wednesday, beyond the P480-billion offering as well as the P593.985 billion in bids the previous week.

Broken down, the seven-day deposits fetched tenders worth P225.195 billion, going beyond the P180 billion on the auction block as well as the P189.03 billion in tenders logged a week ago for the P220-billion offer.

Banks asked for yields ranging from 1.9% to 2.027%, a narrower margin than the 1.88% to 2.1% band logged in the previous offering. With this, the average rate for the tenor settled at 1.972%, inching up by 1.8 basis points (bps) from the 1.954% recorded on Nov. 4.

For the 14-day papers, bids amounted to P397.241 billion, higher than the P300 billion auctioned off on Wednesday but failing to beat the P404.955 billion in tenders for the P270-billion offering last week.

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Accepted rates for the two-week term deposits ranged from 1.875% to 2.084%, a slimmer band compared with the 1.875% to 2.1225% logged a week ago. This brought the average rate for the 14-day papers to 2.0138%, slipping by 3.16 bps from the 2.0454% logged in the previous auction.

For the fifth 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.

“The results of the TDF auction reflect continued ample liquidity in the financial system with an observed preference for the longer tenor,” BSP Deputy Governor Francisco G. Dakila, Jr. said in a statement.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the rates fetched for the term deposits reflected market sentiment on the third- quarter gross domestic product (GDP) data released on Tuesday.

“Auction yields were mixed a day after softer-than-expected GDP data but still better a quarter ago,” Mr. Ricafort said in a text message.

The Philippine economy continued to shrink for a third straight quarter although at a slower pace as lockdown measures were further loosened amid the coronavirus disease 2019 (COVID-19) pandemic.

The economy remained in a recession as GDP contracted by 11.5% in the third quarter after the 16.9% plunge in the second quarter, data from the Philippine Statistics Authority (PSA) released Tuesday showed. GDP grew by 6.3% in the third quarter of 2019.

Year to date, the GDP performance stood at 10% contraction. The government expects the economy to shrink between 4.5%-6.6% this year. — L.W.T. Noble

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