Term deposits fetch higher rates

MANILA, Philippines — Term deposit rates rose across the board at yesterday’s auction as the shorter tenor was undersubscribed due to the celebration of the Chinese New Year next week.

The yield of the seven-day term deposits climbed to 5.0654 percent at the term deposit auction facility (TDF) yesterday from last week’s 5.0447 percent, while the 14-day tenor fetched a higher rate of 5.1770 percent from 5.1437 percent.

Likewise, the 28-day term deposits yielded a higher rate of 5.1779 percent from 5.1290 percent last week.

Overall, the liquidity absorption facility was undersubscribed as bids reached P42.8 billion versus the volume of P50 billion. Both the seven- and 14-day tenors were undersubscribed.

Tenders for the seven-day term deposits amounted to P11.57 billion versus the issue size of P20 billion, while bids for the P20 billion offering of 14-day tenor only reached P18.81 billion.

Banks placed most of their excess funds in the 28-day tenor with tenders amounting to P12.42 billion as against the issue size of P10 billion.

The TDF was launched in June 2016 as part of the shift to the interest rate corridor framework to guide short-term market rates towards the BSP policy interest rate. It also serves as a liquidity absorption facility of the central bank.

The central bank’s Monetary Board decided to keep interest rates unchanged last Dec. 13, pausing from a tightening episode that saw rates rise by 175 basis points in five straight rate-setting meetings since May last year to rein in inflation.

Inflation surged to 5.2 percent last year from 2.9 percent in 2017 due to higher oil and food prices as well as the weak peso. It slowed down to 5.1 percent in December after peaking at a near-decade high of 6.7 percent in September and October.