YIELDS ON the central bank’s term deposit facility (TDF) continued to decrease despite lower bids on Wednesday as investors remain wary of risks that may arise as the coronavirus disease 2019 (COVID-19) continues to spread and amid signals of another rate cut in the second quarter.
Tenders for the Bangko Sentral ng Pilipinas (BSP) term deposits totaled P173.668 billion on Wednesday, higher than the P130 billion offered by the central bank. However, total bids this week failed to beat the P183.468 billion seen last week.
Broken down, tenders for the one-week papers stood at P50.263 billion, surpassing the P40 billion on offer but lower than the P66.422 billion in tenders seen last week for the same offer volume.
Lenders asked for yields ranging from 3.75% to 3.8844%, a slimmer margin compared to the 3.75% to 3.93% logged last week. This resulted in an average rate of 3.825%, slipping by 0.51 basis point (bp) from last week’s 3.8301%.
For the 14-day term deposits, total bids amounted to P69.91 billion, higher than the P50 billion auctioned off and also surpassing the P57.718 billion in tenders logged last week.
Rates of the 14-day deposits fell within 3.8% to 3.9%, a thinner margin compared to the 3.75% to 3.975% band logged the previous week. This caused the average rate for the two-week deposits to clock in at 3.8654%, down by 1.05 bps from the 3.8759% seen on Wednesday last week.
Meanwhile, bids for the 28-day papers hit P53.495 billion, higher than the P40 billion up for grabs but failing to beat the P59.328 billion worth of tenders logged last week for the P50-billion offering.
Yields sought by banks for the one-month deposits ranged from 3.785% to 3.95%, a slimmer range compared to the 3.6525% to 3.99% margin seen last week. With this, average rate for the 28-day term deposits settled at 3.8918%, inching down by 0.66 bp from the 3.8984% seen a week ago.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort attributed the continued decline in TDF yields to market jitters amid concerns on the COVID-19 and to expectations of further easing next quarter.
“The sustained decline in BSP TDF yields, consistently since the start of 2020, may be largely brought about by the sharp declines in global interest rates…amid lingering concerns over the novel coronavirus,” Mr. Ricafort said in an e-mail.
He noted that the benchmark 10-year US Treasuries’ yield succumbed to “a new record low of 1.3055% on Feb. 25” due to “global risk aversion and sharp declines in US and global stock markets.”
Reuters reported that the S&P 500 and the Down Jones Industrial Average both shed more than 3% on Tuesday in their fourth consecutive session of losses. In Asia, Japan’s Nikkei stock index dipped by 0.92%.
So far, the COVID-19 has already infected some 80,000 people across the world and caused the dead of more than 2,600 people, majority of which are in China.
Mr. Ricafort added that the lower yields also came following signals from the BSP that the next rate cut could come as early as the second quarter.
“BSP TDF yields have also been lower recently after BSP Governor [Benjamin E.] Diokno earlier signalled possible 0.25-bp cut in local policy rates as early as Q2 2020 if supported by economic data, since BSP TDF auction yields are pegged on BSP’s policy rates,” Mr. Ricafort said.
Mr. Diokno said earlier this month that the BSP may cut rates by another 25 bps as early as next quarter or in the second half to guard against possible economic risks from the virus outbreak.
The Monetary Board on Feb. 6 trimmed policy rates by 25 bps as a “preemptive move” to shield the economy from downside risks. This brought the rate on the BSP’s reverse repurchase, overnight deposit and lending facilities to 3.75%, 3.25% and 4.25%, respectively. — Luz Wendy T. Noble with Reuters