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Yields on term deposits inch up as BSP sets first bond offering

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YIELDS ON the term deposits auctioned off by the Bangko Sentral ng Pilipinas (BSP) mostly inched up on Wednesday amid an increase in bond supply in the market, with the central bank set to make its maiden issue of securities next week.

Bids for the BSP’s term deposit facility (TDF) totaled P541.442 billion on Wednesday, surpassing the P360 billion on the auction block. This also beat the P502.084 billion in bids logged the previous week for the P310-billion offering.

Broken down, demand for the seven-day papers amounted to P197.394 billion, higher than the P150-billion offering as well as the P171.969 billion in bids seen on Sept. 2.

Banks asked for yields ranging from 1.7788% to 1.9%, a slightly slimmer band compared to the 1.75% to 1.9% seen a week ago. With this, the tenor’s average rate stood at 1.8276%, rising by 1.47 basis points (bps) from the 1.8129% logged in the previous auction.

Meanwhile, the 14-day papers saw tenders totaling P250.278 billion, beating the P160 billion on the auction block and the P225.55 billion in bids seen last week for the P130 billion up for grabs.

Rates for the two-week deposits ranged from  1.82% to 1.875%, a narrower margin compared to the 1.789% to 1.9% recorded on Sept. 2. This brought the average rate of the 14-day papers to 1.8479%, inching up by 0.55 bp from the 1.8424% seen last week.

For the 28-day papers, tenders totaled P93.77 billion, going beyond the P50 billion up for grabs but slightly lower than the P104.565 billion in bids seen the prior week.

Accepted yields ranged from 1.825% to 1.87%, a narrower band compared to the 1.795% to 1.8998% logged in the previous auction. This caused the tenor’s average rate to settle at 1.8518%, slipping by 0.95 bp from the 1.8613% seen a week ago.

The TDF is currently the central bank’s main tool to gather excess liquidity in the financial system to better guide market interest rates.

“Results of the TDF auction continue to show ample liquidity in the financial system. Moreover, the BSP’s calibration of monetary operations will remain guided by its assessment of market developments and liquidity conditions,” BSP Deputy Governor Francisco G. Dakila, Jr. said in a statement.

Yields went up slightly due to “increased bond supply amid the need to finance large stimulus,” said Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort.

The government is looking to raise P160 billion from the domestic market this month: P100 billion via weekly auctions of Treasury bills and P60 billion via Treasury bonds to be offered fortnightly.

It is looking to borrow around P3 trillion this year from local and foreign lenders to help fund its budget deficit expected to hit 9.6% of the country’s gross domestic product.

Meanwhile, BSP Governor Benjamin E. Diokno yesterday said the central bank is holding its maiden offering of securities on Sept. 18 as it looks to shift to market-based monetary operations.

Mr. Diokno said they will first offer 28-day bills with an indicative volume of about P20 billion, subject to confirmation two days before Sept. 18.

“They (28-day bills) will be offered simultaneously at first, but on different days. Eventually, the 28-day TDF will be phased out,” Mr. Diokno said in a text message.

Under Republic Act 11211 or The New Central Bank Act, the BSP now has the authority to issue its own securities. — L.W.T. Noble





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