TERM DEPOSIT YIELDS continued to go down on Wednesday on strong demand as investors sought to lock in still-high rates, with the Bangko Sentral ng Pilipinas (BSP) likely to ease its monetary policy stance further in the coming months.
The central bank’s term deposit facility (TDF) fetched bids amounting to P141.459 billion on Wednesday, well above the P100-billion offering and P106.524 billion in tenders for the P90-billion volume auctioned off a week ago. This allowed the BSP to fully award its offer.
Broken down, tenders for the seven-day papers reached P82.205 billion, higher than the P50 billion auctioned off by the central bank and the P46.254 billion in bids for the same volume offered the previous week. The BSP awarded P50 billion in one-week papers as planned.
Banks asked for yields ranging from 5.5% to 5.355%, narrower than the 5.5% to 5.56% band seen a week earlier. This caused the average rate of the one-week deposits to drop by 1.18 basis points (bps) to 5.5248% from 5.5366% previously.
Meanwhile, bids for the 14-day term deposits amounted to P59.254 billion, more than the P50-billion offering but below the P60.27 billion in tenders for the P40-billion auctioned off a week earlier. Still, the central bank made a full P50-billion award of the two-week papers.
Accepted rates for the two-week tenor were from 5.5% to 5.57%, also narrower than the 5.5% to 5.585% margin seen a week ago. With this, the average rate for the two-week deposits went down by 1.15 bps to 5.5453% from 5.5568% logged in the prior auction.
The BSP made a full award of the term deposits amid strong demand for both tenors, it said in a statement. “The resulting bid-to-cover ratios were at 1.64 times for the 7-day tenor and 1.19 times for the 14-day tenor.”
The central bank has not auctioned 28-day term deposits for more than four years to give way to its weekly offerings 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.
“The TDF average auction yields slightly eased for the third straight week amid increased demand that could indicate locking in relatively higher yields before BSP rates go down further,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
“The strongest peso exchange rate versus the US dollar in eight months that could help reduce importation costs, and benign inflation… justify more dovish signals and further local policy rate cuts,” Mr. Ricafort added.
BSP Governor Eli M. Remolona, Jr. earlier said they are open to cutting rates by a further 75 bps this year amid cooling inflation. Headline inflation in April slowed to an over five-year low of 1.4%, bringing the four-month average to 2%.
The Monetary Board in April reduced benchmark interest rates by 25 bps to bring the policy rate to 5.5%.
The central bank has reduced borrowing costs by a total of 100 bps since it began its easing cycle in August last year.
The Monetary Board’s next policy meeting is on June 19. — Luisa Maria Jacinta C. Jocson
