YIELDS on the central bank’s term deposits climbed on Wednesday after the peso sharply weakened and due to concerns on the impact of the Russian invasion to local commodity prices.
Total bids for the term deposit facility (TDF) of the Bangko Sentral ng Pilipinas (BSP) amounted to P417.154 billion on Wednesday, surpassing the P410-billion offer but lower than the P456.539 billion in tenders last week.
Broken down, tenders for the seven-day papers reached P161.403 billion, higher than the P160 billion auctioned off by the central bank but failing to beat the P186.711 billion in bids the previous Wednesday.
Accepted rates ranged from 1.662% to 2.384%, a tighter band compared with the 1.65% to 2.39% seen a week earlier. This caused the average rate of the one-week papers to increase by 22.39 basis points (bps) to 1.9525% from 1.7286% previously.
Meanwhile, demand for the 14-day deposits stood at P255.751 billion, going beyond the P250-billion offer but lower than the P269.828 billion in tenders a week ago.
Banks asked for yields ranging from 1.7060% to 2.384%, slimmer than the 1.68% to 2.39% band seen on March 2. With this, the average rate of the two-week papers rose by 16.73 bps to 2.0651% from 1.8978% in the prior auction.
The BSP 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 deposits 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.
TDF yields increased due to market concerns as the peso hit its weakest in two years, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
The peso closed at P52.32 on Tuesday, the third straight day it finished at the P52-per-dollar level due to safe-haven demand for the dollar as tensions between Ukraine and Russia deepened. This was its worst finish since it ended at P52.231 on Aug. 28, 2019.
Mr. Ricafort added that TDF yields rose as markets priced in the impact of the war in Ukraine to global commodities like oil and its impact to inflation.
On Tuesday, gasoline, diesel and kerosene prices increased by P3.60, P5.85, and P4.10 a barrel.
The Land Transportation Franchising and Regulatory Board is looking into petitions to raise the minimum jeepney fare. The agency on Tuesday held a hearing to temporarily restore the minimum fare to P10 from P9, while petitions to raise the base fare to P14-P15 have yet to be decided on.
BSP Governor Benjamin E. Diokno has said inflation may breach their 2-4% target in the second quarter due to the continued increase in oil prices, although he expects inflation to return to within target in the next two quarters.
The central bank expects inflation this year to average at 3.7% versus its 2-4% target. In 2021, the consumer price index was at 4.5% amid low supply of food, which caused prices to shoot up. — Luz Wendy T. Noble