Term deposit rates mixed

YIELDS on the central bank’s term deposit facility were mixed on Wednesday following hawkish signals from the Bangko Sentral ng Pilipinas (BSP) chief.

Demand for the BSP’s term deposit facility (TDF) reached P303.317 billion on Wednesday, below the P380-billion offer and the P393.161 billion in bids for the same offer volume at last week’s auction.

Broken down, bids for the seven-day papers amounted to P187.412 billion, lower than the P220 billion auctioned off by the BSP as well as the P236.753 billion in tenders seen in the previous auction.

Banks asked for yields ranging from 6.4099% to 6.459%, a slightly lower band compared with the 6.41% to 6.455% seen a week ago. The average rate of the one-week term deposits inched down by 0.42 basis point (bp) to 6.4315% from 6.4357% previously.

Meanwhile, the 14-day term deposits attracted tenders amounting to P115.905 billion, lower than the P160-billion offer and P156.408 billion in bids recorded on Oct. 18.

Accepted rates for the tenor ranged from 6.418% to 6.48%, a slimmer margin versus the 6.4% to 6.48% seen last week. This caused the average rate of the two-week papers to inch up by 0.07 bp to 6.449% from 6.4483% in the prior auction.

The BSP has not auctioned off 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.

TDF yields were mixed on Wednesday as the central bank chief said the Monetary Board may deliver an off-cycle rate hike as early as Thursday amid upside risks to inflation, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

BSP Governor Eli M. Remolona, Jr. on Tuesday said the Monetary Board is considering hiking benchmark rates this week or next — before its scheduled policy meeting on Nov. 16 — to help anchor inflation expectations.

The BSP has been in a “hawkish pause” at its last four meetings, keeping its policy rate at a near 16-year high of 6.25% after it raised borrowing costs by 425 bps from May 2022 to March 2023 to help tame inflation.

Mr. Remolona earlier said they could hike benchmark rates by 25 bps at their November meeting if price pressures persist.

Headline inflation accelerated to 6.1% in September from 5.3% in August. This brought the nine-month average to 6.6%, well above the BSP’s 2-4% target and 5.8% full-year forecast.

National Economic and Development Authority Secretary Arsenio M. Balisacan on Wednesday said inflation remains driven by supply-side factors and does not warrant further monetary tightening.

“I am not a member of the Monetary Board, and I respect their wisdom, but I think the source of inflation is more supply-side and not the demand-side, which requires monetary policy cure,” Mr. Balisacan said. — Keisha B. Ta-asan

Neil Banzuelo

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