YIELDS ON THE central bank’s term deposits were mixed on Wednesday as the country recorded a narrower budget deficit and as market participants await clearer signals from the US Federal Reserve on its plan to cut its asset purchases.
Demand for the term deposit facility (TDF) of the Bangko Sentral ng Pilipinas (BSP) amounted to P593.589 billion on Wednesday, higher than the P550-billion offer but lower than the P676.998 billion in tenders logged the previous week.
Broken down, bids for the one-week deposits stood at P169.137 billion, above the P150 billion auctioned off by the BSP but dropping from the P249.888 billion in tenders seen in the previous week’s offering.
Banks asked for yields ranging from 1.675% to 2.012%, a wider band compared with the 1.675% to 1.7388% logged last week. This caused the average rate of the seven-day term deposits to rise by 0.94 basis point (bp) to 1.7207% from 1.7113% previously.
Meanwhile, bids for the 14-day papers reached P424.452 billion, beyond the P400-billion offer but lower than the P427.11 billion in demand seen on Aug. 18.
Accepted rates for the tenor ranged from 1.6995% to 1.75%, slightly wider than the 1.7% to 1.745% band seen previously. With this, the average rate of the two-week term deposits slipped by 1.07 bps to 1.7167% from the 1.7274% quoted at last week’s auction.
The BSP did not offer 28-day term deposits for the 44th straight auction to give way to its weekly offerings of bills with the same tenor.
The term deposits and the 28-day bills are tools used by the BSP to mop up excess liquidity in the financial system and to better guide market rates.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said TDF yields were mixed following the release of data showing the government recorded a lower budget gap in July due to slower spending.
Preliminary data from the Bureau of the Treasury showed the government’s fiscal deficit dropped 13.57% to P121 billion last month from the P140.2-billion gap logged a year earlier. The July level was also 19.3% narrower than the P150-billion shortfall in June.
For the first seven months, the budget deficit widened by 19.5% to P837.3 billion from P700.6 billion in the comparable year-ago period.
Government spending in July inched up by 0.69% to P377.3 billion due to a high base. Meanwhile, revenue collections increased 9.2% to P256.1 billion, mainly on the back of a 10% rise in tax revenues.
Mr. Ricafort said the market was also waiting for news from the Fed’s Jackson Hole symposium, where US central bank officials could reveal more details regarding their plan to taper their pandemic-driven monthly asset purchases.
The gathering starts this Thursday and Fed President Jerome Powell will make his speech on Friday.
Based on the minutes of the Fed’s July policy meeting released last week, US central bankers largely expect to start reducing bond purchases within the year. — L.W.T. Noble with Reuters