Yields on the term deposits of the Bangko Sentral ng Pilipinas (BSP) were mixed on Thursday amid hawkish signals from central banks abroad.
Bids for the term deposit facility (TDF) of the central bank amounted to PHP 245.255 billion, surpassing the PHP 240-billion offer as well as the PHP 235.933 billion in tenders seen a week earlier for a PHP 230-billion offer.
Broken down, tenders for the six-day deposits amounted to PHP 134.829 billion, going below the PHP 140 billion auctioned off by the BSP and the PHP 144.275 billion in tenders a week earlier for a PHP 120-billion offer.
Accepted rates were from 6.55% to 6.62%, higher than the 6.525% to 6.605% range recorded last week. This caused the average rate of the six-day term deposits to inch up by 0.12 basis point (bp) to 6.5847% from 6.5835% previously.
Meanwhile, the 13-day papers fetched tenders amounting to PHP 110.426 billion, higher than the PHP 100-billion offer and the PHP 91.658 billion in bids for the PHP 110-billion offering seen the previous week.
Lenders asked for yields ra$nging from 6.5% to 6.6188%, wider than the 6.57% to 6.63% margin seen on June 21. With this, the average rate of the papers declined by 0.05 bp to 6.5961% from 6.5966% in the prior auction.
The maturities of the term deposits were adjusted from the usual seven-day and 14-day tenors due to a holiday on June 28 in observance of Eid’l Adha.
The BSP has not offered 28-day deposits for more than two years to give way to its weekly auctions of bills with the same tenor.
The term deposits and the BSP bills are instruments used by the central bank to mop up excess liquidity in the financial system and guide market interest rates.
TDF yields were lower on Thursday amid hawkish signals from the US Federal Reserve and the Bank of England, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
In a European Central Bank (ECB) conference on Wednesday, Fed Chair Jerome H. Powell said future policy actions of the US central bank will be driven by how the US economy is performing, Reuters reported.
“The committee clearly believes that there’s more work to do, that there are more rate hikes that are likely to be appropriate,” Mr. Powell said.
Earlier this month, the Fed kept its policy rates steady at 5-5.25% after hiking rates by 500 bps since March last year. The next rate setting of the Federal Open Market Committee is on July 25-26.
Mr. Powell also said the Fed does not see core inflation returning to the 2% target until 2025. This may indicate that policymakers will keep rates elevated, longer than what market players expect.
During the conference, ECB President Christine Lagarde said there is not enough evidence of inflation slowing down in the euro zone, while Bank of England Governor Andrew John Bailey said the market is underestimating how long tight policy will remain in place.
According to Mr. Ricafort, any policy moves by the Fed could be mirrored by the BSP to maintain a healthy interest rate differential and help stabilize the peso, import prices, and overall inflation
The Monetary Board kept policy rates steady at 6.25% for the second straight meeting last week. The BSP raised borrowing costs by 425 bps from May 2022 to March 2023 to curb inflation.
Outgoing BSP Governor Felipe M. Medalla earlier said the Monetary Board may continue to hold its key rate at 6.25% until the third quarter of this year.
He also cautioned that cutting rates faster than the Fed may lead to volatility in the foreign exchange market. — Keisha B. Ta-asan with Reuters
This article originally appeared on bworldonline.com