Term deposits yield mixed

MANILA, Philippines — Term deposits yesterday fetched mixed results as investors are closely watching the next move of the Bangko Sentral ng Pilipinas (BSP) after a 25 basis point rate hike last May 10.

The yield of the seven-day tenor slipped to 3.6979 percent from a record high of 3.7006 percent last week.

On the other hand, the 14-day term deposits fetched a record high yield of 3.7222 percent from last week’s 3.6916 percent, while the yield of the 28-day tenor also rose to a record high of 3.7264 percent from 3.7179 percent.

BSP Deputy Governor Diwa Guinigundo said the shift to the interest rate corridor (IRC) framework in June 2016 was aimed at keeping market rates within the band.

“They are supposed to be market driven. That (shift to IRC) was really meant to ensure that the volatility of interest rates is kept within the band and minimized,” he said.

Last May 10, the BSP lifted benchmark rates for the first time in more than three years, prompting banks to calibrate their bids in terms of rates.

The BSP raised interest rates by 25 basis points as latest forecasts have further shifted higher, indicating that inflation pressures could become more broad-based over the policy horizon.

Inflation averaged 4.1 percent in the first five months, exceeding the two to four percent target set by the BSP due to rising oil prices and the impact of the implementation of Republic Act 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN) Law.

Some economists and analysts are expecting a back-to-back rate hike during the next rate-setting meeting of the Monetary Board on June 20.

Likewise, the US Federal Reserve is seen lifting interest rates for the second time this year.

The TDF was oversubscribed yesterday as total tenders for the P100-billion auction amounted to P113.15 billion. The P40 billion seven-day tenor was oversubscribed as bids reached P58.28 billion.

However, both the 14- and 28-day term deposits were undersubscribed.

Bids for the 14-day term deposits amounted to P39.09 billion versus the reduced volume of P40 billion, while the 28-day tenor was also undersubscribed at P15.78 billion against the issue size of P20 billion.