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TDF yields rise ahead of BSP meet


YIELDS on the term deposit facility (TDF) of the Bangko Sentral ng Pilipinas (BSP) continued to rise on Wednesday, as the 14-day papers were undersubscribed, ahead of the Monetary Board’s policy setting on Thursday (Sept. 22).

Total bids for the central bank’s term deposits reached P293.004 billion, going above the P220-billion offer for this week. This is lower than the P306.971 billion in tenders seen last week for a P240-billion offer.

“The BSP decreased the offer volume in the TDF to P220 billion from last week’s P240-billion offering. The volume for the 7-day tenor was maintained at P140 billion while that for the 14-day tenor was adjusted to P80 billion (from P100 billion),” BSP Deputy Governor Francisco G. Dakila, Jr. said in a statement on Wednesday.

Broken down, the seven-day papers fetched bids amounting to P224.229 billion, higher than the P140-billion auctioned off by the BSP. This was lower than the P207.377 billion in tenders logged in the previous auction, where the BSP offered P120 billion.

Banks asked for yields ranging from 3.8088% to 4.22%, a higher and wider margin compared with the 3.75% to 3.8995% band seen a week ago. This caused the average rate of the one-week paper to inch up by 13.99 basis points (bps) to 3.9942% from 3.8543%.

Meanwhile, demand for the 14-day term deposits amounted to P68.775 billion, below the P80-billion offering. This was also lower than P99.594 billion in tenders recorded a week ago for a P100-billion offer.

Accepted rates for the papers were from 3.84% to 4.25%, a tad slimmer than the 3.8% to 4.25% range seen on Sept. 14. With this, the average rate of the two-week deposit rose by 21.04 bps to 4.1681% from 3.9577% 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 reflect the continued preference for the shorter tenor ahead of the BSP’s policy meeting amid ample liquidity in the financial system,” Mr. Dakila said.

“Going forward, the BSP’s monetary operations will remain guided by its assessment of the latest liquidity conditions and market developments,” he added.

Yields on the BSP’s term deposits were higher ahead of the widely expected local policy rate hike on Sept. 22, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The Philippine central bank is widely expected to fire off another 50-basis-point (bp) increase on Thursday as the US Federal Reserve is also expected to further tighten policy this week.

A BusinessWorld poll last week showed 14 out of 15 analysts expect the Monetary Board to raise its benchmark interest rate at its Sept. 22 meeting.

Eleven analysts believe the central bank will deliver a hike of 50 bps, while two analysts see a 25-bp increase. One analyst expects a 75-bp hike, while another sees the BSP keeping rates unchanged.

The rate hike could help stabilize the peso and better manage both inflation and inflation expectations, Mr. Ricafort said.

Latest data from the Philippine Statistics Authority showed the consumer price index climbed 6.3% year on year in August, from the nearly four-year high of 6.4% in July. It remained significantly higher than the 4.4% seen in August 2021.

August marked the fifth consecutive month that inflation exceeded the BSP’s 2-4% target range for the year. The BSP Monetary Board on Aug. 18 raised benchmark interest rates by 50 bps and signaled it has room for more hikes as it battles high inflation. This brought cumulative increases so far to 175 bps since May.

Meanwhile, the Fed will meet to review policy on Sept. 20-21, where markets expect another aggressive hike. It has raised rates by 225 bps so far since March, including back-to-back 75-bp hikes in June and July. — Keisha B. Ta-asan

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