YIELDS ON term deposits slipped on Wednesday on the back of higher bids as the central bank gave the market fresh signals it would ease monetary policy further this year and amid escalating geopolitical tensions in the Middle East, which may have caused investors to put their money in safer havens.
Bids for the term deposit facility (TDF) of the Bangko Sentral ng Pilipinas (BSP) totaled P276.224 billion on Wednesday, well above the P120 billion on offer, according to data from the central bank.
This week’s total tenders also exceeded the P153.434 billion in bids the central received last week against the P90 billion on the auction block.
Banks’ tenders for the seven-day deposits amounted to P102.182 billion, surpassing the P40 billion auctioned off by the central bank and also higher than the P48.605-billion tenders seen last week for the P30 billion on offer.
Rates for the one-week papers ranged from 4.08% to 4.2%, a thinner margin compared to the 4.2%-4.25% seen a week ago. This resulted in an average rate of 4.1641%, slipping by 7.04 basis points (bps) from last week’s 4.2345%.
For two-week deposits, bids hit P88.906 billion, more than double the P40 billion offered by the central bank and also higher than the P49.172 billion worth of tenders seen last week against the P30 billion auctioned.
Banks sought returns ranging from 4.125% to 4.2544%, a wider band compared to the 4.28-4.325% range seen on Jan. 2. The average rate for the 14-day term deposits was at 4.2364%, down 6.81 bps from the 4.3045% logged last week.
Meanwhile, tenders for the 28-day papers totaled P85.136 billion, higher than the P40 billion offered by the central bank and also beating the P55.657 billion in bids seen last week for the P30 billion up for grabs.
The one-month papers fetched rates ranging from 4.125% to 4.3%, a wider range compared to the 4.295% to 4.35% margin seen Jan. 2. This caused its average rate to settle at 4.2704%, inching down by 5.98 bps from the previous auction’s 4.3302%.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort noted that the lower yields came after the BSP chief’s latest signals about the central bank’s policy stance.
“The latest decline in auction yields may be attributed to the latest signals by BSP Governor [Benjamin E.] Diokno about a possible 0.25-[bp] cut in local policy rates within the first quarter of 2020, as the moves in the BSP TDF auction yields are very much correlated and pegged with the BSP’s key overnight borrowing rate/policy rates,” Mr. Ricafort said.
On Tuesday, Mr. Diokno told reporters that the central bank may implement another round of monetary easing as soon as this quarter.
“I promised first quarter of this year, maybe 25 basis points, and we’ll continue to look at other numbers,” he told reporters at the first meeting of the Tuesday Club held in Pasig City.
The BSP Monetary Board last year cut policy rates by 75 bps, partially dialing back the 175 bps worth of hikes implemented in 2018.
The rate on the BSP’s overnight reverse repurchase facility currently stands at 4%, while the overnight deposit and lending rates are at 3.5% and 4.5%, respectively.
The higher bids could also be sign that investors are opting for safe havens, including bonds, amid heightened geopolitical tensions in the Middle East, according to UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion.
“We know that the US-Iran conflict has intensified with Iran just recently retaliated with rockets to targets within Iraq where US forces are stationed,” Mr. Asuncion said.
“Normally, the market environment dictates the appetite for bonds. Bonds are considered “safe havens” for investors when the environment is fraught with fear…,” he added.
On Wednesday, Reuters reported that Iran launched 15 missiles at US-led forces in Iraq as a retaliatory act for the death of their top military official due to a Washington-sponsored drone strike. — Luz Wendy T. Noble