Yields on term deposits mixed on local virus cases, US inflation
YIELDS ON the central bank’s term deposits were mixed on Wednesday amid a decline in new infections and concerns over rising US inflation.
Total bids for the term deposit facility (TDF) of the Bangko Sentral ng Pilipinas (BSP) hit P575.923 billion on Wednesday, surpassing the P510 billion on the auction block as well as the P528.647 billion in bids seen a week earlier.
Broken down, demand for the one-week term deposits amounted to P167.799 billion, higher than the P150 billion auctioned off by the BSP and the P160.199 billion in bids seen in the previous offering.
Banks asked for yields ranging from 1.7% to 1.735%, a slimmer band compared with the 1.7% to 1.745% seen last week. With this, the average rate of the seven-day papers slipped by 0.23 basis point (bp) to 1.723% from the 1.7253% quoted during the May 12 auction.
Meanwhile, the 14-day term deposits attracted tenders amounting to P408.124 billion, well above the central bank’s P360-billion offer and the P368.448 billion in bids last week.
Accepted rates for the tenor ranged from 1.7% to 1.83%, a narrower margin versus the 1.68% to 2.1999% logged in the previous auction. This caused the average rate of the two-week papers to increase by 1.54 bps to 1.7546% from 1.7392% a week ago.
The BSP did not offer 28-day papers for the 30th consecutive week to give way to its weekly offerings of bills with the same tenor.
The central bank uses both the term deposits and its short-term securities to gather excess liquidity in the financial system and guide market rates.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the mixed yield movements seen yesterday reflect investor sentiment on the recent decline in daily coronavirus disease 2019 (COVID-19) cases at home, as well as cautiousness due to rising US inflation.
COVID-19 infections rose by 4,700 on Wednesday to bring the total to 1.159 million, based on data from the Department of Health. This was lower than the average daily count seen in previous weeks and was also a stark improvement from the 10,000 cases seen almost every day in March, which had prompted the government to put parts of the country back under tighter restrictions.
Meanwhile, data from the US Labor department released last week showed the consumer price index rose by 0.8% in April, quicker than the 0.6% in March and marking the fastest pace since June 2009, Reuters reported. The quicker inflation was attributed to the low supply amid the recovering demand as the economy recovers. — L.W.T. Noble with Reuters
