TDF yields inch higher ahead of BSP meeting

YIELDS on the term deposits auctioned off by the Bangko Sentral ng Pilipinas (BSP) climbed on Wednesday, ahead of its policy meeting today (Dec. 15).

Demand for papers under the BSP’s term deposit facility (TDF) totaled P341.947 billion on Wednesday, lower than the P360 billion on the auction block. This is also below the P392.591 billion in bids logged last week for the P400 billion up for grabs.

Broken down, the seven-day deposits attracted tenders amounting to P182.994 billion, lower than the P200-billion offering as well as the P226.057 billion in bids recorded the prior week for a P220-billion offer.

Rates for the one-week papers ranged from 5.85% to 6.385%, marginally wider than the 5.7% to 6.125% range logged in the previous week. This brought the average rate for the tenor to 6.1395%, inching up by 20.49 basis points (bps) from the 5.9346% seen on Dec. 7.

For the 14-day deposits, tenders hit P158.953 billion, going below the P160-billion offering and the P166.534 billion in bids last week for the P180 billion up for grabs.

Accepted yields were seen from 5.875% to 6.55%, a higher band compared with the 5.75% to 6.35% logged the previous week. This brought the average rate of the two-week deposits to 6.2471%, up by 19.21 bps from the 6.055% logged a week ago.

The central bank has not auctioned off 28-day term deposits for more than a year 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 went higher again on Wednesday amid rate hike expectations from the BSP and the US Federal Reserve this week, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The Philippine central bank is widely expected to raise benchmark interest rates by 50 bps today, as the US Federal Reserve is also likely to tighten policy overnight.

A BusinessWorld poll last week showed 14 out of 15 analysts expect the Monetary Board (MB) to continue hiking borrowing costs at its Dec. 15 meeting.

For 13 analysts, the central bank may deliver a 50-bp rate increase, while one economist sees a 25-bp hike from the BSP to tame inflation.

Headline inflation picked up to 8% in November from 7.7% in October and 3.7% in November 2021. For the 11-month period, inflation averaged 5.6%, still lower than the BSP’s 5.8% full-year forecast but well above its 2-4% target.

The BSP has hiked policy rates by 300 bps since May to keep rising prices in check, with the key rate now at 5%.

Meanwhile, the US Federal Reserve has raised borrowing costs by 375 bps since March to a range between 3.75% and 4%. It is widely expected to deliver a smaller rate hike of just 50 bps on Dec. 13-14 following four straight 75-bp increases.

US inflation stood at 7.1% in November, easing from 7.7% in October but still above the central bank’s target. — Keisha B. Ta-asan