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Yields on BSP’s term deposits drop on steady April inflation

YIELDS on the central bank’s term deposits slipped on Wednesday following steady April inflation data and as the peso strengthened in the past days.

Demand for the term deposit facility (TDF) of the Bangko Sentral ng Pilipinas (BSP) hit P583.062 billion on Wednesday, higher than the P510 billion on the auction block as well as the P546.571 billion in tenders logged a week earlier.

Broken down, tenders for the one-week term deposits amounted to P157.385 billion on Wednesday, surpassing the P150-billion offer but failing to beat the P174.267 billion in bids seen during the previous offering.

Banks asked for yields ranging from 1.7% to 1.7499%, narrower than the 1.7% to 1.755% band recorded on April 28. With this, the average rate for the seven-day papers dipped by 0.97 basis point (bp) to 1.7314% from 1.7411% last week.

Meanwhile, the 14-day deposits attracted bids amounting to P425.677 billion, higher than the P360 billion auctioned off by the BSP as well as the P372.304 billion in tenders seen a week ago.

Accepted rates for the two-week papers ranged from 1.7% to 1.76%, lower than the 1.725% to 1.78% band seen last week. This caused the tenor’s average rate to drop by 1.15 bps to 1.7486% from 1.7601% previously.

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

Term deposits and the BSP’s short term securities are used by the central bank to mop up excess liquidity in the financial system and guide market rates.

Yields on the term deposits declined following the release of April inflation data, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said.

Headline inflation was steady at 4.5% in April, data released by the Philippine Statistics Authority on Wednesday showed. This was slower than the 4.7% median estimate in a BusinessWorld poll held last week but remained higher than the BSP’s 2-4% target for the year for the fourth consecutive month.

Year to date, inflation averaged 4.5%, above the central bank’s 4.2% forecast for 2021.

Mr. Ricafort said the peso’s recent rise versus the dollar also improved market sentiment, resulting in the lower TDF yields seen on Wednesday.

The peso logged a four-day rally to close at P48.025 versus the greenback on Wednesday. This was its strongest finish in more than two months or since its P47.93-a-dollar close on Feb. 15. — L.W.T. Noble

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