YIELDS on the central bank’s term deposits ended mixed on Wednesday amid higher inflation expectations and growing tensions between Russia and Ukraine.
Total bids for the term deposits of the Bangko Sentral ng Pilipinas (BSP) reached P571.048 billion on Wednesday, above the P500-billion offer but lower than the P637.875 billion in tenders last week.
Broken down, the seven-day papers fetched bids amounting to P259.007 billion, going beyond the P190 billion auctioned off by the BSP but failing to beat the P302.236 billion in bids a week ago.
Accepted rates were from 1.625% to 1.6995%, inching down from the 1.65% to 1.7125% margin in the prior auction. This caused the average rate of the one-week papers to decline by 1.13 basis points (bps) to 1.6745% from 1.6858% previously.
Meanwhile, tenders for the 14-day deposits amounted to P312.041 billion, slightly above the P310 billion auctioned off by the BSP but lower than the P335.639 billion seen the previous week.
Banks asked for yields ranging from 1.659% to 2.39%, increasing from the 1.65% to 2.2% on Feb. 17. With this, the average rate of the two-week deposits rose by 8.38 bps to 1.7882% from 1.7044% in the prior auction.
The central bank has not auctioned off 28-day term deposits for more than a year to give way to its weekly offering of securities with the same tenor.
The term deposit facility (TDF) and the 28-day bills are used by the BSP to mop up excess liquidity in the financial system and to better guide market rates.
The average yields on the term deposits were mixed after the central bank raised its inflation forecasts for 2022 and 2023, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
The BSP’s policy-setting Monetary Board on Thursday kept benchmark interest rates at record lows, as widely expected by the market. However, BSP Governor Benjamin E. Diokno appeared to be less dovish as he hinted on an “eventual normalization” of policy once recovery is sustained or if inflation risks arise.
At the same meeting, the BSP said they expect inflation this year to average at 3.7%, faster than the 3.4% given in December but still within the 2-4% target and slower than the 4.5% in 2021. The inflation forecast for 2023 was likewise raised to 3.3% from 3.2%.
BSP officials said higher global oil and nonoil prices may cause faster inflation this year.
Mr. Ricafort said there were also concerns over rising tensions between Russia and Ukraine and its impact to oil prices.
Russia has ordered its troops to support separatist region in Ukraine earlier this week, Reuters reported. As a retaliatory move, Western nations including the US, UK, and Germany imposed economic sanctions by restricting their business deals with Russia and the conflicted areas.
Amid such tensions, oil prices hit its highest level since 2014 at nearly $100 a barrel on Tuesday. An official from the US State department assured that the current tensions in Ukraine will not risk the supply flow of oil and gas to global markets. — L.W.T. Noble with Reuters