YIELDS on the central bank’s term deposits were mixed on Wednesday after the US Federal Reserve hinted at a quarter-point rate hike at their policy meeting next week.
Demand for the term deposit facility (TDF) of the Bangko Sentral ng Pilipinas (BSP) amounted to PHP 330.374 billion, higher than the PHP 320 billion on the auction block but below the PHP 404.159 billion in tenders for a PHP 350-billion offer seen a week earlier.
Broken down, the seven-day term deposits fetched bids amounting to PHP 173.577 billion, lower than the PHP 180 billion auctioned off by the BSP as well as the PHP 259.374 billion in tenders logged for the previous week’s offering of PHP 190 billion.
Accepted rates for the tenor ranged from 6.2% to 6.43%, higher than the 6% to 6.4% band logged a week ago. This caused the average rate of the one-week deposits to rise by 0.64 basis point (bp) to 6.3037% from 6.2973% previously.
Meanwhile, demand for the two-week deposits amounted to PHP 153.797 billion, surpassing the PHP 140-billion offer as well as the PHP 144.785 billion for a PHP 160-billion offering the previous week.
Banks asked for yields of 6.175% to 6.4388%, narrower than the 6.15% to 6.5088% range seen last week. This caused the average rate of the paper to drop by 2.76 bps to 6.3457% from the 6.3733% quoted on Jan. 18.
The BSP has not offered 28-day term deposits for more than two years to give way to its weekly offerings of bills with the same tenor.
The term deposits and the 28-day bills are used by the BSP to gather excess liquidity in the financial system and guide market rates.
TDF yields were mixed on Wednesday amid dovish Fed signals, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
US Federal Reserve Governor Christopher J. Waller earlier said he supports a 25-bp rate increase at the Federal Open Market Committee’s first policy meeting for this year scheduled on Jan. 31 to Feb. 1.
Mr. Waller added he is still “cautious” about the trajectory of US inflation and expected it would take “continued tightening of monetary policy” for inflation to fall within the Fed’s 2% target.
The Fed hiked its federal funds rate by 50 bps in December to a 4.25%-4.5% range following four straight 75-bp increases. This brought cumulative hikes for 2022 to 425 bps.
TDF yields were also mixed following policy signals from the BSP chief, Mr. Ricafort added.
BSP Governor Felipe M. Medalla said earlier this month that the central bank is likely to raise benchmark rates by 25 or 50 bps at its meeting on Feb. 16 to anchor inflation expectations.
Last Friday, Mr. Medalla said the BSP will likely end its tightening cycle with one or two more increases this quarter, which will bring its key rate to around 6%.
The BSP hiked borrowing costs by 350 bps in 2022 in an effort to bring down elevated inflation, with its policy rate now at 5.5%. Its first policy-setting meeting for this year will be held on Feb. 16. — Keisha B. Ta-asan
This article originally appeared on bworldonline.com