Yields on term deposits drop on strong demand

Term deposit yieds fell on Wednesday amid strong demand for the offering ahead of the release of Philippine November inflation data.

The Bangko Sentral ng Pilipinas’ (BSP) term deposit facility (TDF) attracted total bids worth PHP 342.937 billion on Wednesday, well above the PHP 260 billion placed on the auction block and the PHP 250.598 billion in bids fetched a week ago for a PHP 280-billion offer.

Broken down, bids for the seven-day term deposits stood at PHP 213.622 billion, above the PHP 150-billion offer as well as the PHP 154.953 billion in tenders for the PHP 160 billion auctioned off a week ago.

Accepted rates were from 5.9755% to 6.06%, narrower than the 5.975% to 6.0815% range a week ago. As a result, the average rate for the one-week deposits fell by 1.59 basis points (bps) to 6.0425% from 6.0584% last week.

Meanwhile, tenders for the 14-day papers reached PHP 129.315 billion, higher than the PHP 110 billion auctioned off by the central bank. It was also above the PHP 95.645 billion in bids for the PP120-billion worth of deposits offered last week.

Banks asked for yields ranging from 6% to 6.11%, also narrower than the 6% to 6.125% margin a week earlier. This caused the average rate of the two-week deposits to slip by 0.86 bp to 6.0816% from the 6.0902% quoted the previous week.

The BSP has not auctioned off 28-day term deposits for more than four years to give way to its weekly offerings of securities with the same tenor.

The central bank uses the term deposits and BSP bills to help mop up excess liquidity in the financial system and to better guide market rates.

“The BSP TDF average auction yields mostly eased slightly for the 11^th straight week ahead of the latest local inflation data that is expected to remain relatively benign at 2% levels,” Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said in a Viber message.

The Philippine Statistics Authority is scheduled to release November inflation data on Thursday (Dec. 5.)

Philippine headline inflation likely picked up to 2.5% in November, according to the median estimate in a BusinessWorld poll of 15 analysts conducted last week.

This is within the central bank’s 2.2% to 3% forecast for the month as well as its 2-4% annual target.

This would also be slightly faster than the 2.3% clip in October but slower than 4.1% in the same month a year ago.

The central bank expects headline inflation to average 3.1% this year. In the first 10 months, the consumer price index averaged 3.3%.

Easing inflation would also make room for further monetary easing by the BSP, Mr. Ricafort said.

BSP Governor Eli M. Remolona, Jr. has said that the Monetary Board could reduce or keep rates steady at its Dec. 19 meeting, its last policy review for the year.

Since August, the central bank has lowered benchmark borrowing costs by 50 bps, bringing the policy rate to 6%. — Luisa Maria Jacinta C. Jocson