Term deposit yields up on oil price gains

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YIELDS ON the Bangko Sentral ng Pilipinas’ (BSP) term deposits continued to pick up following the recent climb in global oil prices.

Demand for the central bank’s term deposit facility (TDF) reached P695.227 billion on Wednesday, well above the P600 billion it auctioned off but lower than the P739.382 billion in tenders a week ago.

Broken down, the BSP’s one-week papers attracted tenders amounting to P283.972 billion, beyond the P200 billion on the auction block as well as the P258.927 billion in bids fetched on Feb. 17.

Banks asked for yields ranging from 1.59% to 1.656%, a slimmer band compared with the 1.59% to 1.698% seen at last week’s auction. This caused the average rate for the tenor to increase by 0.32 basis point (bp) to 1.6342% from 1.631% previously.

Meanwhile, the 14-day papers fetched bids amounting to P411.255 billion, surpassing the P400-billion offering but failing to beat the P480.455 billion in bids logged a week ago.

Accepted rates for the two-week term deposits were seen at 1.6 to 2%, a wider band the 1.59% to 1.7925% a week earlier. With this, the average rate of the papers rose by 6.12 bps to 1.7055% from the 1.6443% quoted at last week’s auction.

The BSP did not offer 28-day term deposits for the 19th straight week. This follows the start of BSP’s weekly offerings 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.

“With ample liquidity in the financial system, market participants continue to search for yield as indicated by the strong demand for the BSP’s deposit facilities amid the RTB (retail Treasury bond) offering,” BSP Deputy Governor Francisco G. Dakila, Jr. said in a statement.

The Bureau of the Treasury is currently offering three-year RTBs that carry a coupon rate of 2.375% for a minimum of P5,000, with the sale set to run until March 4, unless ended earlier. It sold an initial P221.218 billion in retail papers in its rate-setting auction on Feb. 9.

Meanwhile, the uptick in TDF yields this week came amid recent higher global oil prices, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a text message.

Oil prices surged last week as some operations in Texas oil wells and refineries were disrupted by extreme weather conditions. The winter storm caused a loss of 2 million barrels per day in production and a shutdown of nearly 20% of refining capacity in the US.

Reuters reported that production has not fully restarted in Texas this week. On Tuesday, US crude slipped by 3 cents to $61.67 a barrel which was still close to its highest levels since January 2020. Meanwhile, Brent crude rose 13 cents to $65.37 a barrel. — L.W.T. Noble with Reuters