Term deposit rates up

MANILA, Philippines — Term deposit rates rose yesterday, bringing the seven-day term deposits to 3.3484 percent from last week’s 3.3334 percent with accepted rates ranging from 3.235 to 3.4 percent.

The yield of the 28-day term deposits increased to 3.495 percent from 3.491 percent as accepted yields ranged between 3.45 and 3.5 percent.

The term deposit auction facility (TDF) remained undersubscribed as total tenders for the P150-billion offering reached only P139.27 billion yesterday.

Tenders for the shorter-dated term deposits amounted to P37.83 billion, lower than the offer size of P40 billion while that of the longer-dated term deposit offering of P110 billion only attracted P101.44 billion worth of tenders.

BSP officer-in-charge Diwa Guinigundo said the market continued to prefer shorter-dated debt instruments due to the volatility brought about by the normalization of interest rates in the US.

The US Fed has raised interest rates twice this year, one in March and another one in June. It is expected to implement one more rate hike this year.

 “The situation continues to be very fluid. I believe the market still prefers short tenors, although with the probability of a US Fed funds rate increase diminishing this year, some segments may test longer than seven days,” Guinigundo said.

Likewise, the BSP deputy governor said market appetite would change once the massive infrastructure spending under the Build, Build, Build program kicks off.

 “Once the national government issues bonds in a bigger way to support higher public spending on infra, market appetite is bound to change,” Guinigundo said.

The national government has lowered its foreign commercial borrowings by 54.5 percent to $1 billion next year from the planned $2.2 billion this year as it almost doubled its programmed concessional loans to $1.65 billion from $849.4 million.

 “What is important at this point is that the interest rate dynamics is broadly steady, interest rate volatility remains manageable. Takes longer time series to really establish firmer trend,” Guinigundo said.