Term deposit rates mixed in auction

MANILA, Philippines — Term deposits posted mixed results yesterday with yields for both the 15- and 28-day term deposit offerings declining ahead of the last rate-setting meeting of the Bangko Sentral ng Pilipinas (BSP).

The central bank’s Monetary Board is widely anticipated to keep interest rates unchanged today after slashing benchmark rates by 75 basis points this year, partially unwinding a tightening cycle that saw rates jump by 175 basis points in 2018.

The yield of the seven-day term deposits inched up by 2.06 basis points to 4.3040 percent.

On the other hand, the 15-day tenor fetched 4.3249 percent, down 0.61 basis points. The 28-day term deposit rate likewise fell by 0.26 basis points to 4.3496 percent.

The liquidity absorption facility was oversubscribed as the latest 100 basis points reduction in the level of deposits big and mid-sized banks are required to keep with the central bank took effect.

The central bank has lowered the RRR for universal, commercial, and thrift banks by 400 basis points and by 200 basis points for small banks as part of its commitment to bring down the level to single digit by 2023 to free up much needed funds to boost economic activity.

Total tenders reached P181.53 billion for the three tenors, slightly higher than the programmed P180 billion.

Both the seven- and 15-day term deposits were oversubscribed as bids amounted to P66.83 billion and P69.99 billion, respectively, higher than the P60 billion offering for each tenor.

On the other hand, tenders for the 28-day tenor only reached P44.71 billion as against the issue size of P60 billion.

Last Nov. 14, the central bank kept interest rates unchanged to allow previous monetary actions including the 75 basis points rate cuts since the start of the year filter its way into the economy.

The BSP is also widely expected to keep rates steady as inflation accelerated to a three-month high of 1.3 percent in November after bottoming out at a 43-month low of 0.8 percent in September.

Inflation is seen averaging at 2.4 percent this year after shooting up to 5.2 percent, exceeding the BSP’s two to four percent target, due to elevated oil and rice prices as well as a weak peso.