Term deposit yields inch down before BSP meeting

Yields on term deposits auctioned off by the Bangko Sentral ng Pilipinas (BSP) edged lower on Wednesday ahead of the Monetary Board’s policy review and amid the government’s ongoing offer of retail Treasury bonds (RTBs).

Bids for the BSP’s term deposit facility (TDF) hit PHP 353.976 billion on Wednesday, surpassing the PHP 310 billion on the auction block and the PHP 339.676 billion in tenders seen a week prior.

Broken down, the one-week papers attracted tenders totaling PHP 196.214 billion, above the PHP 180 billion auctioned off by the BSP as well as the PHP 170.523 billion in bids for a PHP 160-billion offer the previous week.

Accepted yields for the seven-day deposits ranged from 6.57% to 6.6%, a narrower margin compared with the 6.56% to 6.612% seen on Feb. 7. With this, the average rate of the papers stood at 6.5873%, down by 0.16 basis point (bp) from the 6.5889% seen a week ago.

For the 14-day term deposits, bids totaled PHP 157.762 billion, higher than the PHP 130 billion on offer. However, it was lower than the PHP 169.153 billion in tenders last week for PHP 150 billion on the auction block.

Banks asked for returns ranging from 6.588% to 6.625%, a thinner band versus the 6.2% to 6.635% seen in the previous auction. This brought the average rate of the two-week deposits to 6.6111%, also down by 0.16 bp from the 6.6127% logged previously.

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.

TDF yields went down on Wednesday before the BSP’s first rate-setting meeting for the year, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The BSP is widely expected to keep its policy rate at a 16-year high of 6.5% for a third straight meeting this week, according to a BusinessWorld poll.

Analysts said the Monetary Board may keep rates steady amid upside risks to inflation and robust economic growth. It is also not expected to cut borrowing costs ahead of the US Federal Reserve.

Philippine headline inflation fell to 2.8% in January from 3.9% in December and 8.7% in the same month a year ago, marking the slowest print since the 2.3% in October 2020. It was also the second straight month that inflation was within the BSP’s 2-4% target.

TDF yields went down “amid the ongoing RTB offering,” Mr. Ricafort added.

“The huge RTB maturity by early March 2024 could lead to additional excess liquidity in the market, offset by any large RTB issuance,” Mr. Ricafort added.

The government raised an initial PHP 212.719 billion from the RTBs following the rate-setting auction held on Tuesday. The five-year retail bonds fetched a coupon rate of 6.25%.

The final amount raised from the 30^th tranche of RTBs could reach PHP 400 billion amid strong demand and with the government also doing an exchange offer for three- and five-year retail bonds due to mature next month, Bureau of the Treasury Officer-in-Charge Sharon P. Almanza said on Tuesday. — Keisha B. Ta-asan