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Yields on BSP’s term deposits rise on rate hike expectations


YIELDS on the Bangko Sentral ng Pilipinas’ (BSP) term deposits rose on Wednesday as investors expect central banks in the Philippines and the United States to continue raising rates at their meetings next week.

Demand for the term deposit facility (TDF) of the central bank totaled P344.195 billion on Wednesday, above the P340-billion offering but lower than the P356.153 billion in tenders recorded last week.

Broken down, bids for the seven-day term deposits amounted to P210.861 billion, below the P220 billion auctioned off by the BSP. It also dropped from the P223.392 billion in tenders for a P200-billion offering seen a week earlier.

Accepted rates ranged from 5.5% to 6.7%, wider than the 6.4375% to 6.6% margin seen in the previous week’s auction. With this, the average rate of the one-week paper rose by 4.67 basis points (bps) to 6.5537% from 6.507% previously.

Meanwhile, the 14-day papers attracted P133.334 billion in bids, above the P120-billion offering. Demand was also up from the P132.761 billion in tenders for a P140-billion offer seen on March 8.

Banks asked for yields from 5.6% to 6.7%, a wider band compared with the 6.395% to 6.749% recorded a week earlier. This caused the average rate of the two-week tenor to increase by 6.7 bps to 6.6057% from 6.5387%.

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

The TDF and the 28-day bills are used by the BSP to gather excess liquidity in the financial system and to better guide market rates.

TDF yields were a tad higher this week as markets priced in a likely 25-bp rate increase from the US Federal Reserve, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message on Wednesday.

The Fed’s next policy review will be on March 21-22.

The US central bank raised the fed funds rate by 25 bps to 4.5-4.75% last month, bringing cumulative increases since March 2022 to 450 bps.

Mr. Ricafort said the Fed’s move could be matched by the BSP in its own meeting on March 23 “to maintain a comfortable interest rate differential that will help stabilize the peso, import prices, and overall inflation.”

BSP Governor Felipe M. Medalla earlier said they could consider raising borrowing costs by 25 bps or 50 bps at their policy meeting this month.

The Monetary Board last month hiked benchmark rates by 50 bps for a second straight meeting, bringing its policy rate to 6%.

It has now raised borrowing costs by 400 bps since May 2022 to help bring down elevated prices. — Keisha B. Ta-asan

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