Yields on term deposits mixed ahead of inflation
YIELDS ON THE central bank’s term deposits were mixed on Wednesday on market expectations of easing inflation pressures amid measures to boost food supply, even as risks remain on the global front.
Total tenders for the term deposit facility (TDF) of the Bangko Sentral ng Pilipinas (BSP) hit P572.605 billion on Wednesday, surpassing the P510-billion offer and the P524.301 billion in demand recorded in the previous auction.
Broken down, bids for the one-week papers reached P158.544 billion, higher than the P150 billion on the auction block but failing to beat the P159.225 billion in tenders logged last week.
Banks asked for yields ranging from 1.7% to 1.73%, a narrower margin compared with the 1.7% to 1.7315% band seen a week ago. With this, the average rate for the seven-day term deposits dipped by 0.02 basis point (bp) to 1.72% from 1.7202% previously.
Meanwhile, tenders for the 14-day papers amounted to P414.061 billion, well above the P360 billion offered by the BSP as well as the P365.076 billion in bids seen during the previous auction.
Accepted rates for the tenor ranged from 1.6875% to 1.9%, lower than the 1.725% to 2.08% band seen last week. Still, the average yield of the two-week term deposits increased by 1.46 bps to 1.786% from 1.7714%.
The BSP did not offer 28-day term deposits for the 32nd consecutive auction to give way to its weekly offerings of bills with the same tenor.
The term deposits and the short-term securities are used by the central bank to mop up excess liquidity in the financial system and to better guide market rates.
Term deposit yields ended mixed on Wednesday ahead of the release of May inflation data, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said.
Mr. Ricafort said inflation may have eased on the back of lower tariffs on pork, but higher global oil prices due to a recovery in demand pose an upside risk.
Headline inflation likely remained unchanged for a third straight month in May, as food prices generally stabilized amid the lockdown in the Philippine capital and nearby provinces, economists said.
A BusinessWorld poll of 17 analysts last week yielded a median estimate of 4.5% for May inflation, closer to upper end of the central bank’s 4-4.8% estimate for the month.
If realized, this would mark the third straight month of steady inflation. However, it is still beyond the BSP’s annual 2-4% target and is quicker than the 2.1% print a year earlier.
The Philippine Statistics Authority will release official May inflation data on June 4.
Executive Order 134 signed earlier this month temporarily lowered the tariffs for pork products to 10% for three months under the current minimum access volume and 20% for the first three months for imports outside the quota. By the fourth to 12th month, applicable tariffs will be at 15% and 25% for in-quota and out-quota pork products, respectively. — L.W.T. Noble
