TERM DEPOSIT YIELDS declined on Wednesday after the Bangko Sentral ng Pilipinas (BSP) delivered a second straight rate cut last week.
Total bids for the central bank’s term deposit facility (TDF) reached P112.339 billion, above the P100 billion placed on the auction block but below the P143.638 billion in tenders seen last week for a P140-billion offer. However, the central bank awarded only P96.531 billion in papers as the two-week deposits went undersubscribed.
Broken down, tenders for the seven-day term deposits stood at P65.808 billion, more than the P50 billion placed on the auction block but lower than the P94.542 billion in bids seen last week for the a P70-billion offer. The BSP made a full P50-billion award of the one-week tenor.
Banks asked for yields ranging from 5.1% to 5.385%, narrower than the 5.1% to 5.5055% margin seen last week. This caused the average rate of the one-week term deposits to fall by 18.03 basis points (bps) to 5.3013% from 5.4816% a week ago.
Meanwhile, the 14-day papers attracted bids worth P46.531 billion, below the P50 billion auctioned off by the BSP as well as the P49.096 billion in tenders fetched for the P70 billion on offer last week. The central bank accepted all the bids submitted for the tenor.
Accepted rates were from 5.25% to 5.53%, wider than the 5.46% to 5.53% range seen a week ago. As a result, the average yield of the 14-day deposits went down by 10.21 bps to 5.4117% from the 5.5138% fetched last week.
The BSP has not auctioned off 28-day term deposits for more than four years to give way to its weekly offerings of securities with the same tenor.
The TDF and BSP bills are used by the central bank to mop up excess liquidity in the financial system and to better guide market yields closer to the policy rate.
“The BSP TDF average auction yields declined, largely due to the 25-bp BSP rate cut on June 19… BSP TDF yields eased despite lower total bids and partial awards, partly reflecting higher bid yields,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
Mr. Ricafort added that TDF rates dropped on easing inflation concerns amid the recent decline in global crude oil prices after Iran and Israel agreed to a ceasefire after exchanging airstrikes for 12 days.
The Monetary Board last week cut benchmark borrowing costs by 25 bps for a second straight meeting, bringing the target reverse repurchase rate to 5.25%, as expected by 15 out of 16 analysts in a BusinessWorld poll.
It has now lowered rates by 125 bps since it began its easing cycle in August last year.
BSP Governor Eli M. Remolona, Jr. said they could deliver at least one more 25-bp cut this year as the inflation outlook has moderated, but said they remain watchful of emerging price risks, including the conflict in the Middle East and global trade uncertainties.
The Monetary Board has three more policy meetings this year. — AMCS
