YIELDS on term deposits inched lower on Wednesday as the offer went undersubscribed ahead of the Bangko Sentral ng Pilipinas (BSP) monetary policy meeting.
The BSP’s term deposit facility (TDF) fetched bids amounting to P105.851 billion on Wednesday, well below the P160 billion on the auction block and the P179.018 billion for a P180-billion offer seen a week ago.
Broken down, tenders for the eight-day term deposits reached just P40.096 billion, lower than the P80 billion auctioned off by the central bank and the P90.542 billion in bids seen the previous week.
Banks asked for yields ranging from 6.4875% to 6.5215%, wider than the 6.495% to 6.52% band seen a week ago. This caused the average rate of the one-week deposits to drop by 0.36 basis point (bp) to 6.5119% from 6.5155% previously.
The one-week tenor was adjusted from the usual seven-day maturity as its settlement date was moved to Aug. 22 due to the Ninoy Aquino Day holiday on Aug. 21, the BSP said.
Meanwhile, bids for the 14-day term deposits amounted to P65.755 billion on Wednesday, also below the P80-billion offering and as well as the P88.476 billion in tenders for the P100-billion offer on Aug. 7.
Accepted rates for the two-week tenor were from 6.47% to 6.57%, also wider than the 6.53% to 6.57% margin seen a week ago. With this, the average rate for the term deposits declined by 0.83 bp to 6.544% from 6.5523% logged in the prior auction.
The BSP has not auctioned off 28-day term deposits for more than three years to give way to its weekly offerings of securities with the same tenor.
The term deposits and the 28-day bills are used by the central bank to mop up excess liquidity in the financial system and to better guide market rates.
Term deposit yields slipped ahead of the BSP’s rate-setting meeting on Thursday amid recent signals from the central bank governor on potentially keeping rates steady, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
The Monetary Board will hold its third-to-the-last policy review for the year today (Aug. 15).
A BusinessWorld poll showed that nine out of 16 analysts surveyed expect a 25-bp cut, which would bring the target reverse repurchase (RRP) rate to 6.25% from the current over 17-year high of 6.5%.
BSP Governor Eli M. Remolona, Jr. on Tuesday told reporters that there is “more room to stay tight” amid the stronger-than-expected gross domestic product growth seen last quarter.
The Philippine economy grew by 6.3% in the second quarter, its fastest expansion in five quarters or since the 6.4% in the first quarter of 2023.
Mr. Remolona also said that the BSP will have room to ease rates once inflation is back within their 2-4% annual target band.
Headline inflation accelerated to 4.4% in July, the fastest in nine months. It also ended seven straight months of inflation settling within the central bank’s target. — Luisa Maria Jacinta C. Jocson
