Yields on BSP’s term deposits up after August inflation quickened

TERM DEPOSIT yields inched up due to faster-than-expected August inflation. — PHILIPPINE STAR/ KRIZ JOHN ROSALES

YIELDS on the central bank’s term deposits inched up on Wednesday as August inflation came in faster than expected.

Demand for the term deposit facility (TDF) of the Bangko Sentral ng Pilipinas (BSP) reached P614.05 billion on Wednesday, bigger than the P550 billion on offer but a tad lower than the P618.3 billion in bids recorded for the previous week’s auction.

Broken down, bids for the seven-day papers reached P191.36 billion, breaching the P160-billion program. However, this was lower than the P232.84 billion in tenders seen during last week’s offering.

Banks asked for yields ranging from 1.69-1.85%, a higher and wider band compared with the 1.675%-1.739% a week ago. This caused the average rate of the one-week term deposits to rise to 1.714% from 1.712% previously.

Meanwhile, the two-week term deposits attracted tenders worth P422.712 billion, higher than the P400 billion the BSP auctioned off on Wednesday and the P385.46 billion in demand seen the previous week.

Accepted rates for the tenor fell within 1.705%-2%, a narrower band compared with the 1.7%-2.21% margin logged last week. As a result, the 14-day papers fetched an average rate of 1.752%, up from 1.738% a week ago.

The BSP did not offer 28-day term deposits for the 46th consecutive auction to give way to its weekly offerings of bills with the same tenor.

The term deposits and the 28-day bills are used by the BSP to gather excess liquidity in the financial system and to better guide market rates.

“Today’s auction results show the continued preference of market participants toward the shorter tenor. Nevertheless, market conditions remain normal amid sustained ample liquidity in the financial system,” BSP Deputy Governor Francisco G. Dakila said in a statement on Wednesday.

Term deposit yields went up as inflation picked up in August, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said via Viber.

The Philippine Statistics Authority reported on Tuesday that headline inflation accelerated to 4.9% last month from the 4% logged in July, as food prices continued to spike.

This was the fastest headline print in 32 months or since the 5.1% recorded in December 2018. It was also faster than the 4.4% median estimate in a BusinessWorld poll conducted last week and was at the higher end of the 4.1-4.9% estimate of the central bank.

Inflation averaged at 4.4% in the first eight months, breaching the central bank’s 2-4% target and 4.1% forecast for the year.

Rates also went up after the government backtracked on its earlier decision to ease restrictions in Metro Manila, Mr. Ricafort said. He added that yields also tracked the rise in the 10-year US Treasury bond’s rate.

Presidential Spokesperson Herminio L. Roque, Jr. said on Tuesday that Metro Manila will remain under modified enhanced community quarantine until Sept. 15. The government had previously announced that the country’s capital will be under the least restrictive quarantine classification until the end of the month as it plans to implement targeted lockdowns to boost economic activity.

The country is currently facing its worst coronavirus outbreak yet due to the more contagious Delta variant.

The Health department reported 18,012 new infections on Tuesday, bringing the country’s active cases to 158,637. — B.M. Laforga

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