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Term deposit yields drop on lower oil prices, lockdown

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YIELDS on central bank’s term deposits slipped on Wednesday amid lower oil prices and a decline in economic activity due to the return of stricter restriction measures in some parts of the country.

Bids for the term deposit facility (TDF) of the Bangko Sentral ng Pilipinas (BSP) hit P685.078 billion on Wednesday, surpassing the P480-billion offer. This was also more than the P669.409 billion in tenders seen last week.

“The results of the TDF auction continue to show ample liquidity in the financial system and are in line with market preference for safe assets as they factor in the BSP’s unchanged policy rate and the reimposition of stricter quarantine measures,” BSP Deputy Governor Francisco G. Dakila, Jr. said in a statement.

Broken down, tenders for the seven-day term deposits amounted to P226.288 billion, going beyond the P140-billion offering as well as the P261.363 billion in demand recorded the week prior.

Banks asked for yields ranging from 1.7% to 1.85%, a narrower range compared with the 1.71% to 1.89% seen last week. This brought the average rate of the one-week tenor to 1.828%, down by 1.52 basis points (bps) from the 1.8432% fetched on March 24.

Meanwhile, demand for 14-day deposits reached P458.79 billion, above the P340 billion auctioned off by the central bank and the P408.046 billion in tenders seen a week ago.

Accepted rates for the tenor were from 1.7% to 1.8924%, slimmer than the 1.5% to 1.929% band seen previously. With this, the average rate for the two-week papers dropped 1.71 bps to 1.8727% from 1.8898% in the previous auction.

The BSP did not offer 28-day deposits for the 24th straight auction to give way to its weekly auction of bills with the same tenor.

The central bank uses the term deposit facility and its securities to mop up excess liquidity in the financial system and guide market interest rates.

Term deposit yields declined following the downward correction in global oil prices and amid the reimposition of strict lockdown measures in Metro Manila and some provinces, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said.

Oil prices fell more than 1% on Tuesday after market sentiment was soothed by the reopening of the Suez Canal after being blocked by a container carrier for nearly a week, Reuters reported.

Brent crude price declined 1.2% or 84 cents to $64.14 per barrel. Meanwhile, the West Texas Intermediate ended the session with its price falling by 1.6% or $1.01 to $60.55 a barrel.

At home, Metro Manila and nearby provinces Cavite, Laguna, Rizal, and Bulacan are under the strictest lockdown measures from March 29 to April 4. — Luz Wendy T. NoblewithReuters

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