Term deposit rates mixed as oil, ASF fan inflation fears
Lawrence Agcaoili (The Philippine Star) - September 19, 2019 - 12:00am

MANILA, Philippines — Term deposits fetched mixed results yesterday as the weekend attack on the oil production facilities in Saudi Arabia allegedly perpetuated by Iran fanned inflation concerns.

The yield of the seven-day term deposits eased by 1.63 basis points to 4.3323 percent from last week’s 4.3486 percent, while that of the 28-day tenor also slipped by 3.29 basis points to 4.4578 percent from 4.4907 percent.

On the other hand, the 14-day term tenor fetched 4.4139 percent at the term deposit auction facility (TDF) yesterday, 1.44 basis points higher than the previous week’s 4.3995 percent.

The liquidity absorption facility was again oversubscribed as bids amounted to P96.43 billion, higher than the increased volume of P80 billion.

Bids for the seven-day term deposits reached P32.6 billion versus the P20-billion issue size.

Likewise, tenders for the 14-day tenor amounted to P31.31 billion, higher than the P30 billion volume, while bids for the 28-day term deposits reached P32.52 billion versus the issue size of P30 billion.

BSP Deputy Governor Francisco Dakila Jr. said the impact of the recent attacks on the oil fields in Saudi Arabia, as well as the outbreak of the Asian swine flu virus in the Philippines pose upside risks to inflation.

“These developments represent upside risks to the inflation outlook,” Dakila said.

However based on preliminary simulations by BSP staff, Dakila said inflation is expected to remain within the central bank’s two to four percent target for this year even with a transitory rise in international crude oil prices.

“We also expect the ASF outbreak to have a limited direct impact on domestic inflation, as meat products (excluding preserved and canned products) account for only about 4.9 percent of the CPI basket,” he added.

Inflation averaged three percent in the first eight months of the year after easing to a 35-month low of 1.7 percent in August from 2.4 percent in July.

“Nevertheless, we continue to closely monitor the situation for potential second-round effects. As always, our decision on the monetary policy stance will depend on how these and other developments will shape our outlook for inflation,” Dakila said.  

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