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Yields on term deposits drop on tax flows, gov’t euro bond issue

YIELDS on the central bank’s term deposits inched down on Wednesday on flows from the April deadline of tax payments and following the government’s return to the global bond market.

Total tenders for the term deposit facility (TDF) of the Bangko Sentral ng Pilipinas (BSP) amounted to P546.571 billion on Wednesday, surpassing the P490 billion on the auction block but lower than the P582.773 billion in bids seen last week.

Broken down, bids for the seven-day term deposits reached P174.267 billion, going beyond the P140-billion offer but lower than the P179.141 billion in tenders logged last week.

Accepted rates for the tenor ranged from 1.7% to 1.755%, a thinner band versus the 1.7% to 1.7715% logged in the previous week’s auction. This caused the average rate for the one-week term deposits to dip by 1.3 basis points (bps) to 1.7411% from 1.7541% previously.

Meanwhile, the two-week papers fetched bids worth P372.304 billion, higher than the P350 billion on the auction block but failing to surpass the P403.632 billion in tenders during the April 21 offering.

Banks asked for yields ranging from 1.725% to 1.78%, a slimmer margin compared with the 1.725% to 1.8% a week ago. With this, the average rate of the 14-day term deposits declined by 2.59 bps to 1.7601% from 1.786% in the previous auction.

The BSP did not offer 28-day deposits for the 27th consecutive auction to give way to its weekly offerings of bills with the same tenor.

The term deposits and BSP bills are instruments used by the central bank to mop up excess liquidity in the financial system and guide market interest rates.

Term deposit yields dropped on Wednesday following the April 15 deadline for tax payments, which is expected to boost the government’s cash position, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said.

“[This] reduces the need for the government to borrow locally and help ease the pressure on local interest rate benchmarks,” Mr. Ricafort said in a text message.

He added that yields on the papers declined after the government’s euro-denominated bond issuance last week.

The Bureau of the Treasury raised P122.4 billion (€2.1 billion) in fresh funds through four-year, 12-year, and 20-year debt papers last week, which will be used to support the national budget as the country struggles to contain the virus spread. — L.W.T. Noble

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