Term deposit rates hit record levels

MANILA, Philippines — Term deposit rates rose across the board to hit record levels after the Bangko Sentral ng Pilipinas (BSP) delivered another rate hike as a proactive action to rein in inflationary pressures.

Banks continued to recalibrate their bids after the Monetary Board raised interest rates by another 25 basis points as inflation is expected to remain elevated this year before easing back to the BSP’s two to four percent target.

The seven-day tenor yesterday fetched a record yield of 4.9738 percent or 14.47 basis points higher than last week’s 4.8291 percent, while the rate of the 14-day term deposits rose 19.54 basis points to a record 5.0596 percent from 4.8642 percent.

On the other hand, the yield of the 28-day tenor jumped 20.24 basis points to a new all-time high of 5.1186 percent from 4.9162 percent last week.

Liquidity is starting to go back to the system as banks swarmed the term deposit auction facility (TDF). Bids reached P98.35 billion versus the lowered issue size of P70 billion.

Tenders for the P40 billion seven-day term deposits amounted to P54.18 billion, while bids for the P20-billion 14-day tenor reached P29.76 billion.

On the other hand, the 28-day tenor was also oversubscribed as bids amounted to P14.41 billion versus the revised P10 billion volume.

The BSP has so far raised interest rates by 175 basis points in five consecutive rate-setting meetings to curb rising inflationary pressures. Inflation steadied at a near-decade high of 6.7 percent in October, bringing the average to 5.1 percent in the first 10 months of the year and exceeding the central bank’s two to four percent target.