Term deposit rates mixed

MANILA, Philippines — Term deposits were mixed anew yesterday with the yield for the eight and 15- day tenors easing, while the yields for the 28-day term deposits inching up after the Bangko Sentral ng Pilipinas (BSP) decided to keep interest rates unchanged.

The eight-day term deposits fetched a higher yield of 4.2724 percent at the term deposit auction facility (TDF) yesterday or 3.1 percent lower than last week’s 4.3040 percent, while the rate for the 15-day tenor slipped by 0.6 basis points to 4.3288 percent from 4.3249 percent.

On the other hand, the 28-day term deposit rate inched up by 0.4 basis points to 4.3446 percent from 4.3496 percent.

As widely anticipated, the central bank kept interest rates steady on Dec. 12 to allow previous policy actions to work its way through the economy.

The BSP slashed benchmark rates by 75 basis points this year, partially unwinding a tightening cycle that saw rates jump by 175 basis points in 2018.

It also reduced the reserve requirement ratio by 400 basis points for big and mid-sized banks and by 200 basis points for small funds to release much needed funds to boost economic activity.

BSP Deputy Governor Francisco Dakila Jr. said demand for cash continues to increase ahead of the Christmas holidays.

The liquidity absorption facility was oversubscribed as tenders amounted to P165.3 billion versus the reduced volume of P150 billion due to scheduled long holidays during Christmas and New Year.

Both the eight- and 28-day term deposits were oversubscribed. Bids for the eight-day tenor reached P73.83 billion versus the issue size of P60 billion, while tenders for the 28-day term deposits amounted to P49.92 billion as against the lowered volume of P40 billion.

On the other hand, the 15-day tenor was undersubscribed as bids only amounted to P41.52 billion versus the reduced issue size of P50 billion.

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 the weak peso.

For 2020 and 2021, inflation is expected to accelerate to 2.9 percent.