YIELDS ON term deposits offered by the Bangko Sentral ng Pilipinas (BSP) dropped on Wednesday following the central bank’s surprise rate cut last week.
Demand for the central bank’s term deposit facility (TDF) reached P602.03 billion on Wednesday, surpassing the P460 billion up for grabs but lower than the P645.585 billion in tenders logged in last week’s auction.
Broken down, the one-week deposits attracted bids amounting to P193.53 billion, going beyond the P170 billion on the auction block but failing to beat the P230.855 billion in tenders recorded last week.
Lenders asked for yields ranging from 1.62% to 1.8%, a lower band than the 1.945% to 2.0095% margin logged a week ago. With this, the tenor’s average rate stood at 1.7479%, dropping by 23.34 basis points (bps) from the 1.9813% logged on Nov. 18.
Meanwhile, tenders for the 14-day papers hit P408.5 billion, higher than the P290-billion offering but also below the P414.73 billion in bids seen a week ago for the P190 billion auctioned off by the BSP.
Accepted rates ranged from 1.64% to 1.7925%, declining from the 1.9% to 2.0455% band logged the previous Wednesday. With this, the two-week paper’s average rate settled at 1.7326%, lower by 26.58 bps from the 1.9984% seen a week ago.
The central bank did not offer the 28-day term deposits for the seventh consecutive week. This follows the start of the central bank’s weekly auctions of its own bills with the same tenor.
The TDF and the BSP’s securities are among the central bank’s main tools to gather excess liquidity in the financial system and to better guide market interest rates.
Term deposit yields declined sharply this week due to the surprise rate cut fired off by the BSP, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said on Wednesday.
The BSP unexpectedly cut benchmark rates to new record lows last week, the fifth reduction this year, citing the continued uncertainty caused by a fresh surge in coronavirus cases globally and the impact of recent typhoons on the struggling economy.
The Monetary Board on Thursday trimmed the rates on the BSP’s overnight reverse repurchase, lending, and deposit facilities by 25 bps to 2%, 2.5%, and 1.5%, respectively.
The latest easing move followed a “prudent pause” by the central bank since its June meeting. The central bank has already cumulatively lowered interest rates by 200 bps this year.
A BusinessWorld poll showed five out of 16 analysts expected the BSP to cut rates by 25 bps.
The central bank upgraded its inflation forecast this year to 2.4% from the 2.3% it gave in the October meeting.
On the other hand, the inflation outlook for 2021 and 2022 were lowered to 2.7% (from 2.8%) and 2.9% (from 3%), respectively, due to the slower-than-expected pickup in domestic activity, the decline in global crude oil prices, and the strengthening of the peso.
Philippine gross domestic product declined by 11.5% in the third quarter, slightly better than the record 16.9% contraction seen in the April to June period. — LWTN
Credit belongs to : https://www.bworldonline.com/