TERM DEPOSIT yield is gone fell on Wednesday as markets priced in the latest Philippine inflation data and amid a stronger peso.
The BSP’s time deposit facility (TDF) attracted P350.69 billion on Wednesday, up from P270 billion in the auction and P342.937 billion of the P260-billion offering seen last week.
Once completed, seven-day paper tenders totaled P198.58 billion, more than the P160 billion sold by the central bank. However, this was less than the P213.622 billion bids seen for the P150-billion seven-day deposit offer last week.
Banks asked for yields ranging from 5.985% to 6.04%, a narrow band compared to the 5.9755% to 6.06% seen last week. This caused the average one-week deposit rate to decrease by 1.77 basis points (bps) to 6.0248% from 6.0425%.
Meanwhile, 14-day deposit bids reached P152.11 billion, higher than the P110-billion offer and P129.315 billion tenders for the same supply volume recorded on Dec. 4.
Accepted tenor rates range from 6% to 6.08%, and are smaller than the 6% to 6.11% margin recorded last week. With this, the average two-week deposit rate decreased by 2.02 bps to 6.0614% from 6.0816% recorded in last week’s 14-day paper auction.
The BSP has not sold 28-day term deposits for more than four years to provide a weekly offering of securities with the same tenor.
The term deposits and liabilities of the BSP are used by the central bank to collect excess funds from the financial system and to better regulate market prices.
“The BSP TDF auction yield ratio has also dropped sharply to 12th exactly one week after local headline inflation reached 2.5% in November 2024, it is still considered negative and still within the BSP’s inflation target of 2-4%,” said Rizal Commercial Banking Corp. Chief Economist. Michael L. Ricafort in a Viber message.
Inflation rose to 2.5% in November from 2.3% in October as food prices rose after a series of typhoons hit the country.
For the 11-month period, headline inflation reached 3.2%, which is significantly higher than the BSP’s baseline forecast of 3.1% but within the annual target of 2-4%.
Within the November inflation target “may still warrant a reduction in the local policy rate on December 19,” Mr. Ricafort.
The Finance Board will hold its final policy review for this year on Dec. 19. BSP governor Eli M. Remolona, ​​Jr. earlier said they may lower or keep rates unchanged at the meeting.
The BSP started its easing cycle in August this year and has delivered a total of 50 bps so far, bringing the policy rate to 6%.
Mr. Ricafort said the recent strong peso pushed TDF yields lower on Wednesday.
After closing its record low of P59 per dollar on Nov. 21 and 26, the peso has recovered, even returning to the P57 level last week, partly boosted by seasonal income inflows.
On Wednesday, the local unit closed at P58.28 against the dollar, down 27 centavos from Tuesday’s close. – Luisa Maria Jacinta C. Jocson
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