Yields on BSP’s term deposit facility rise as demand drops

THE CENTRAL BANK’S term deposits fetched higher rates on Wednesday as demand weakened. — BW FILE PHOTO

YIELDS on the central bank’s term deposits inched higher on Wednesday amid lower bids following the government’s retail Treasury bond offering and ongoing geopolitical tensions between Russia and Ukraine.

Demand for the term deposits of the Bangko Sentral ng Pilipinas (BSP) amounted to P456.539 billion, lower than the P500-billion offering as well as the P571.048 billion in bids a week earlier.

Broken down, the BSP’s offer of seven-day papers was undersubscribed, with bids at P186.711 billion against the P220-billion offer. This was also lower than the P259.007 billion in tenders last week.

Lenders asked for yields ranging from 1.65% to 2.39%, higher than the 1.625% to 1.6995% a week ago. This caused the average rate of the one-week papers to increase by 5.41 basis points (bps) to 1.7286% from 1.6745% in the prior auction.

Meanwhile, the 14-day term deposits fetched bids worth P269.828 billion, lower than the P280 billion auctioned off by the BSP and the P312.041 billion in tenders the previous Wednesday.

Accepted rates were from 1.68% to 2.39%, a narrower range compared with the 1.659% to 2.39% band a week ago. With this, the average rate of the two-week deposits increased by 10.96 bps to 1.8978% from 1.7882% previously.

The central bank has not offered 28-day term deposits for more than a year to give way to its weekly auction of securities with the same tenor.

The term deposit facility (TDF) 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 increased this week following the RTB offering, which siphoned off some liquidity from the financial system, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said.

The government raised P457.8 billion through the five-year RTBs which were offered for two weeks until Monday. The bond fetched a coupon rate of 4.875%.

The amount raised was bigger than the P360 billion borrowed by the government last year through an offering of 5.5-year RTBs.

Mr. Ricafort said the market is also still concerned about the ongoing conflict between Russia and Ukraine.

Russian military invaded several areas on Thursday last week, following an announcement by President Vladimir Putin, Reuters reported.

Earlier this week, the two sides agreed to talk without pre-conditions. However, Russia continued to intensify its military invasion in Ukraine. — Luz Wendy T. Noble with Reuters