Term deposit yields end mixed

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YIELDS ON THE central bank’s term deposits ended mixed on Wednesday, with the two-week papers’ rate seeing an increase, amid the government’s ongoing sale of retail Treasury bonds (RTBs).

Demand for the Bangko Sentral ng Pilipinas’ (BSP) term deposit facility (TDF) reached P700.754 billion on Wednesday, beating the P600-billion program. It was also bigger than the P695.227 billion in tenders seen last week.

Broken down, the BSP made a full P200-billion award of the one-week debt papers it offered on Wednesday as tenders hit P283.031 billion, inching down from the P283.972 billion in bids seen at the Feb. 25 auction.

Banks asked for yields ranging from 1.6% to 1.675%, a higher band compared with the 1.59% to 1.656% range seen previously. This caused the seven-day papers to fetch an average rate of 1.6332%, inching down by 0.1 basis point (bp) from the 1.6342% logged in last week’s auction.

The central bank also raised P400 billion as planned via the 14-day securities from total bids worth P417.723 billion. Wednesday’s total tenders were slightly higher than the P411.255 billion recorded a week ago.

Accepted rates for the tenor settled between 1.6475% and 2%, a slimmer band than the previous range of 1.6-2%. The average rate of the two-week term deposits rose by 7.49 bps to 1.7804% on Wednesday from 1.7055% last week.

The BSP did not offer 28-day term deposits for the 20th straight week to give way to its weekly offering of bills with the same tenor.

The TDF and BSP securities are tools used by the central bank to mop up excess liquidity in the financial system and to better guide market interest rates.

BSP Deputy Governor Francisco G. Dakila, Jr. said in a statement that the uptick in the rate of the two-week term deposits may have been caused by a shift in preference for investors searching for higher returns.

“Moving forward, the BSP’s monetary operations will continue to be guided by its assessment of liquidity conditions and market developments,” Mr. Dakila said.

TDF rates ended mixed as excess liquidity in the markets have been siphoned off by the ongoing sale of three-year RTBs set to end on Thursday, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a mobile phone message.

The Bureau of the Treasury is currently offering three-year RTBs that carry a coupon rate of 2.375% until March 4. It sold an initial P221.218 billion in retail papers in its rate-setting auction on Feb. 9.

“Expectations of higher inflation at new two-year highs partly led to higher TDF auction yields in recent weeks,” Mr. Ricafort added.

“Despite mixed results, this still shows liquidity remaining strong and probably just a slight shift in appetite for the two-week debt paper. Although we have to see if this is sustained in the coming weeks,” Security Bank Corp. Chief Economist Robert Dan J. Roces said via Viber on Wednesday.

Headline inflation likely breached the central bank’s target for a second straight month in February, as food and fuel prices remain elevated, according to economists.

A BusinessWorld poll of 16 analysts last week yielded a median estimate of 4.8%, near the upper end of the 4.3% to 5.1% estimate range given by the BSP but beyond the 2-4% annual target.

If realized, the median estimate will be quicker than the 4.2% print in January and the 2.6% a year earlier. It would also be the quickest since 5.1% print in December 2018.

The Philippine Statistics Authority will report February inflation data on March 5.

The Monetary Board at its rate-setting meeting on Feb. 11 raised its average inflation forecast this year to 4% from 3.2% previously. — Beatrice M. Laforga