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Yields on term deposits decline as US inflation slows in August

Yields on term deposits decline as US inflation slows in August

YIELDS on the central bank’s term deposits slipped on Wednesday on softer US inflation last month.

Total bids for the term deposit facility (TDF) of the Bangko Sentral ng Pilipinas (BSP) reached P607.663 billion on Wednesday, surpassing the P510 billion on offer but a tad lower than the P614.05 billion in tenders seen a week ago.

Broken down, demand for the seven-day papers amounted to P216.55 billion, surpassing the P150-billion program and the P191.356 billion in tenders logged in the previous week’s auction.

Accepted rates for the tenor ranged from 1.69%-1.73%, a slimmer band compared with the 1.69-1.85% margin seen a week earlier. This caused the average rate of the one-week term deposits to slip by 0.6 basis point (bp) to 1.7083% from the 1.7143% quoted last week.

Meanwhile, the 14-day term deposits fetched bids worth P391.113 billion, going beyond the P360 billion auctioned off by the BSP but lower than the P422.712 billion in tenders recorded a week earlier.

Banks asked for yields ranging from 1.7%-1.8999%, a narrower margin than the 1.705%-2% band logged last week. With this, the average yield on the two-week papers inched down by 0.94 bp to 1.7423% from 1.7517% in the previous auction.

The BSP did not offer 28-day term deposits for the 47th straight auction to give way to its weekly offerings of bills with the same tenor.

The term deposits and the 28-day bills are used by the BSP to gather excess liquidity in the financial system and to better guide market rates.

TDF yields inched down following the release of data showing slower US inflation, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a text message.

The US Labor department on Tuesday said the overall consumer price index rose 0.3% in August, slowing from the 0.5% in July, Reuters reported. This is also softer than the 0.4% estimate by economists in a Reuters poll.

Meanwhile, core inflation, which excludes volatile food and energy components, rose by 0.1%, marking the slowest increase since February and also easing from the 0.3% in July. It was likewise softer than the 0.3% estimated by economists in a Reuters poll.

The government’s move to shift to an alert level system to curb the spread of the coronavirus also affected sentiment, Mr. Ricafort added.

Government officials on Tuesday announced new restriction measures which put areas under alert levels, with five being the highest. Alert Level 5 shall be imposed in areas where case counts are “alarming” and hospital utilization rates are at “critical” levels.

Presidential Spokesperson Herminio “Harry” L. Roque, Jr. said Metro Manila will be under Alert Level 4 starting Thursday until Sept. 30. This level means the area has high or increasing coronavirus transmission and a high healthcare system utilization rate.

Trade Secretary Ramon M. Lopez said some businesses including manufacturing firms would be allowed to operate in Metro Manila, restoring as many as 200,000 jobs. — L.W.T. Noble with Reuters

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