YIELDS on the term deposits auctioned off by the Bangko Sentral ng Pilipinas (BSP) climbed on Wednesday amid hawkish policy signals and ahead of the release of February inflation data.
Demand for the BSP’s term deposit facility (TDF) totaled PHP 245.13 billion on Wednesday, lower than the PHP 300 billion on the auction block. This was also below the PHP 324.786 billion in bids logged last week for the PHP 280 billion on offer.
Broken down, the seven-day deposits attracted PHP 149.636 billion in tenders, lower than the PHP 160 billion on the auction block as well as the PHP 159.827 billion in bids recorded the prior week for a PHP 150-billion offer.
Accepted rates for the one-week papers ranged from 6.368% to 6.65%, higher than the 6.25% to 6.55% logged the previous week. This brought the average rate for the tenor to 6.4687%, up by 8.01 basis points (bps) from the 6.3886% seen on February 22.
For the 14-day deposits, tenders hit PHP 95.494 billion, below the PHP 140-billion offer and the PHP 164.959 billion in bids last week for the PHP 130 billion auctioned off by the BSP.
Accepted yields were from 6.3945% to 6.62%, up from the 6.25% to 6.49% band recorded the previous week. This brought the average rate of the two-week deposits to 6.4932%, rising by 7.52 bps from the 6.055% logged a week ago.
The central bank has not auctioned off 28-day term deposits for more than two years to give way to its weekly offering of securities with the same tenor.
The term deposits and the 28-day bills are used by the BSP to mop up excess liquidity in the financial system and to better guide market rates.
TDF yields climbed on Wednesday amid hawkish policy signals from the BSP and ahead of the release of February inflation data, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
BSP Governor Felipe M. Medalla earlier said the Monetary Board might hike policy rates again at its next meeting on March 23 to quell demand-side pressures and manage inflation expectations.
He said a 25-bp hike is the “most likely” option this month due to a “great possibility” that inflation has already peaked in January as non-monetary measures are starting to dampen price increases.
The BSP raised benchmark interest rates by 50 bps at its February 16 meeting, bringing its key rate to 6%, the highest in nearly 16 years.
The Monetary Board has increased borrowing costs by a total of 400 bps since May 2022 to tame inflation.
Meanwhile, February inflation likely settled within the 8.5% to 9.3% range, the BSP said on Tuesday. This would follow January’s 8.7% print, which was the quickest since November 2008.
If realized, February would mark the 11th straight month that inflation would exceed the BSP’s 2-4% target range. The upper end of the forecast or 9.3% would be the fastest pace recorded in more than 14 years or since the 9.7% recorded in October 2008.
“Upward price pressures for the month are expected to emanate from higher LPG (liquefied petroleum gas) prices as well as elevated prices of key food items, such as pork, fish, egg, and sugar,” the BSP said. “Meanwhile, the lower prices for domestic petroleum, fruits and vegetables, chicken, and beef, along with the peso appreciation could contribute to easing price pressures during the month.”
The BSP sees inflation averaging 6.1% this year.
The Philippine Statistics Authority will release the February consumer price index on March 7. — Keisha B. Ta-asan