YIELD on the term deposit facility (TDF) of the Bangko Sentral ng Pilipinas (BSP) rose on Wednesday due to low demand ahead of the central bank’s policy meeting on Thursday.
Total bids for the BSP’s term deposits reached P305.484 billion, below the P400-billion offer for this week. This was also lower than P324.328 billion in tenders seen last week for a P400-billion offer.
Broken down, the seven-day papers fetched bids amounting to P179.794 billion, below the P200-billion auctioned off by the BSP and P199.395 billion in tenders logged in the previous auction for a P230-billion offer.
Banks asked for yields ranging from 6.55% to 6.7399%, a narrower margin compared with the 6.5325% to 6.7399% band seen a week ago. The average rate of the one-week paper increased by 3.32 basis points (bps) to 6.6473% from 6.6141%.
Meanwhile, demand for the 14-day term deposits amounted to P125.69 billion, lower than the P130-billion offering. Still, this was above the P124.933 billion in tenders recorded a week ago for a P170-billion offer.
Accepted rates for the papers were from 6.585% to 6.775%, a higher margin versus the 6.55% to 6.75% range seen on Nov. 8. With this, the average rate of the two-week deposit rose by 4.6 bps to 6.6699% from 6.6233% in the previous week’s auction.
The central bank has not auctioned 28-day term deposits for three years 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.
Yields on the BSP’s term deposits climbed as the offer was undersubscribed, BSP Deputy Governor Francisco Dakila, Jr. said in a statement on Wednesday.
This was due to banks’ servicing of loan releases and client withdrawals ahead of the central bank’s policy meeting, Mr. Dakila said.
“Nevertheless, financial system liquidity remains ample. Looking ahead, the BSP’s monetary operations will continue to be guided by its assessment of prevailing liquidity conditions and market developments,” he added.
A BusinessWorld poll conducted last week showed that 15 out of 18 analysts expect the Monetary Board to keep its key rate at a 16-year high of 6.5%.
Meanwhile, three economists said the Monetary Board may hike benchmark rates by 25 bps at Thursday’s meeting.
The BSP last month hiked its policy rate by 25 bps in an off-cycle move to help anchor inflation expectations. It has raised interest rates by 450 bps since May 2022.
Yields on the BSP’s term deposits rose “due to some seasonal window-dressing activities before the accounting yearend,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort added in a Viber message. — Aaron Michael C. Sy