Term deposits fetch record yields

MANILA, Philippines — Term deposits fetched record yields anew as banks swarmed yesterday’s auction after the Bangko Sentral ng Pilipinas (BSP) further tightened the country’s monetary conditions with a back-to-back 50-basis point rate hike to anchor rising inflationary expectations.

The seven-day term deposits fetched a record yield of 4.7127 percent at the term deposit auction facility (TDF) yesterday, 29.12 basis points higher than last week’s 4.4215 percent.

The 14-day tenor commanded a 26.3-basis point increase to an all-time high of 4.7352 percent from 4.4722 percent last week, while the rate of the 28-day term deposits rose 30.07 basis points to a record high of 4.7884 percent from 4.4877 percent.

BSP officer-in-charge Diwa Guinigundo said banks again recalibrated their bids after the central bank’s Monetary Board raised interest rates anew by another 50 basis points as part of a stronger policy action to curb rising inflationary expectations.

“BSP’s policy rate hike signals higher yields in the TDF. This is part of the recalibration of liquidity and the adjustment process towards greater macro stability,” Guinigundo said.

The BSP has so far raised benchmark rates by 150 basis points to serve as its major weapon in its battle against rising inflation due to higher oil and food prices, weak peso, and the impact of the implementation of Republic Act 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN) Law.

The BSP now expects inflation to average 5.2 percent this year and 4.3 percent in 2019. The consumer price index averaged 4.8 percent in the first eight months, exceeding the BSP’s two to four percent target for 2018 and 2019.

Guinigundo also cited the robust government spending under its massive infrastructure build up under the Build Build Build program.

“Government is spending and spending robustly on infrastructure and other public sector projects,” the BSP deputy governor said.