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TDF yields climb as BSP, Fed continue to raise interest rates


YIELDS on the term deposit facility (TDF) of the Bangko Sentral ng Pilipinas (BSP) continued to rise on Wednesday amid continues rate hikes at home and in the United States.

Total bids for the central bank’s term deposits reached P317.604 billion, going above the P240-billion offer for this week. This is a tad lower than the P320.442 billion in tenders seen last week for a P200-billion offer.

Broken down, the seven-day papers fetched bids amounting to P195.304 billion, higher than the P140-billion auctioned off by the BSP. This was also higher than the P182.573 billion in tenders logged in the previous auction, where the BSP offered P120 billion in six-day papers.

Banks asked for yields ranging from 3.7% to 3.85%, a narrower margin compared with the 3.54% to 3.9% band seen a week ago. This caused the average rate of the one-week paper to inch up by 1.75 basis points (bps) to 3.8051% from 3.7876%.

Meanwhile, demand for the 14-day term deposits amounted to P122.3 billion, above the P100-billion offering. However, this was lower than P137.869 billion in tenders recorded a week ago for an P80-billion offer of 13-day papers.

Accepted rates for the papers were from 3.7% to 3.9%, slimmer than the 3.6% to 3.95% range seen on Aug. 25. With this, the average rate of the two-week deposit rose by 3.55 bps to 3.8454% from 3.8099% in the previous week’s auction.    

The central bank has not auctioned 28-day term deposits for more than a year 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.

“The results of the TDF auction show market participants’ greater preference for the shorter tenor,” BSP Deputy Governor Francisco G. Dakila, Jr. said in a statement on Wednesday. “Bid rates have continued to increase following the recent 50-bp hike in the BSP’s policy rate as well as the US Federal Reserve’s continued interest rate increases to bring inflation under control.”

“For its part, the BSP’s monetary operations will remain guided by its assessment of the latest liquidity conditions and market developments,” Mr. Dakila added.

The BSP on Aug. 18 raised benchmark interest rates by 50 bps and signaled it has room for more hikes as it battles rising inflation.

The Monetary Board has increased rates by a total of 175 bps since May. BSP Governor Felipe M. Medalla earlier said they will need to respond if the US Federal Reserve’s tightening continues to be aggressive.

The US central bank has raised rates by 225 bps since March, including back-to-back 75-bp increases in June and July. Fed Chair Jerome H. Powell last week said the US may see slower economic growth and an increase in unemployment as the central bank continues to raise rates to fight rising inflation.

Yields on the term deposits were higher amid the government’s ongoing retail Treasury bond (RTB) sale, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The offer period for the RTBs maturing in 2028 is from Aug. 23 to Sept. 2, while settlement is on Sept. 7.

The government last week raised an initial P162.72 billion from the price-setting auction for its offer of 5.5-year retail bonds as tenders reached P225.32 billion, or more than seven times the P30-billion plan. — Keisha B. Ta-asan

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