TDF rates rise as inflation hits 14-year high in Nov.

YIELDS on the central bank’s term deposits rose on Wednesday as inflation hit a 14-year high in November, which may prompt the Bangko Sentral ng Pilipinas (BSP) to continue raising borrowing costs.

Demand for the BSP’s term deposit facility (TDF) reached P392.591 billion on Wednesday, below the P400 billion auctioned off by the central bank. Still, this was higher than the P233.469 billion in bids for a P330-billion offering seen last week.

Broken down, bids for the one-week term deposits amounted to P226.057 billion, above the P220 billion on the auction block and the P111.737 billion in tenders logged the previous week for a P180-billion offer.

Accepted rates were from 5.7% to 6.125%, wider than the 5.49% to 6.025% band seen a week ago. This brought the average rate of the seven-day papers to 5.9346%, increasing by 18.32 basis points (bps) from the 5.7514% quoted previously.

Meanwhile, the 14-day papers fetched bids totaling P166.534 billion, lower than the P180 billion bid out by the central bank but surpassing the P121.732 billion for a P150-billion offer recorded on Nov. 29.

Lenders asked for yields ranging from 5.75% to 6.35%, higher than the 5.6% to 6.175% margin logged a week earlier. With this, the average rate of the two-week deposits rose by 18.88 bps to 6.055% from 5.8662% in the prior auction.

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.

Faster November headline inflation caused TDF yields to go up, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

Preliminary data from the Philippine Statistics Authority (PSA) showed headline inflation accelerated by 8% in November, the fastest since the 9.1% print during the Global Financial Crisis in November 2008.

The latest print was also faster than the 7.7% in October, and 3.7% in November 2021. It was also higher than the median estimate of 7.8% in a BusinessWorld poll of 15 analysts conducted last week, but within the 7.4-8.2% forecast range of the Bangko Sentral ng Pilipinas (BSP).

November inflation also breached the BSP’s 2-4% target range for an eighth straight month.

For the first 11 months, headline inflation averaged 5.6%, faster than the 4% in the same period a year ago. However, this was still below the BSP’s full-year forecast of 5.8%.

The BSP said in a statement on Tuesday that it “remains prepared to take all further monetary policy actions necessary to bring inflation back to a target-consistent path over the medium term.”

The central bank has raised the key policy rate by 300 bps to 5% since May to curb soaring inflation. The Monetary Board’s last policy review meeting for the year is on Dec. 15.

“Some window-dressing activities as the accounting year-end draws closing also led to seasonally higher short-term interest rates or crossing-the-year premium for deposits and other sources of funding/borrowings,” Mr. Ricafort added.

He said this is part of banks’ balance sheet management, which is expected to subside once the year ends. — Keisha B. Ta-asan