YIELDS on the central bank’s term deposits climbed on Wednesday, with market players positioning ahead of an expected aggressive hike by the US Federal Reserve and amid growing inflation pressures at home.
Demand for the term deposit facility (TDF) of the Bangko Sentral ng Pilipinas (BSP) reached P364.664 billion, surpassing the P300-billion offer and the P355.58 billion in bids a week earlier.
Broken down, tenders for the seven-day term deposits amounted to P188.484 billion, higher than the P140-billion auctioned off by the BSP and the P144.719 billion in bids logged last week.
Banks asked for rates ranging from 2.1% to 2.5%, narrower than the 2% to 2.5125% band seen in the previous auction. This caused the average rate of the papers to rise by 9.14 basis points (bps) to 2.4163% from 2.3249% last week.
Meanwhile, the 14-day papers fetched bids worth P176.18 billion, higher than the P160-billion offering but lower than the P210.861 billion in tenders logged a week ago.
Accepted rates for the tenor were from 2.25% to 2.7205%, wider than the 2.245% to 2.55% margin seen last week. With this, the average rate of the two-week term deposits increased by 11.87 bps to 2.5178% from 2.3991%.
“The results of the auction continued to reflect market participants’ anticipated increase in policy rates. Nevertheless, market conditions remain normal, supported by sustained ample liquidity in the financial system,” BSP Deputy Governor Francisco G. Dakila, Jr. said in a statement.
The BSP has not offered 28-day term deposits for more than a year to give way to its weekly auctions of short-term bills with the same tenor.
The term deposit facility and the one-month securities are used by the BSP to gather excess liquidity in the financial system and to better guide market rates.
TDF yields rose ahead of an expected rate hike by the Fed, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
The Federal Open Market Committee is widely expected to fire off at least a 50-bp hike at its June 14-15 review to temper rising prices.
The US consumer price index (CPI) for the 12 months through May rose by 8.6% as gasoline prices and the cost of food soared, leading to the largest annual inflation print since 1981.
Fed policy makers had signaled half-point interest rate hikes at their meeting next week and again in July ahead of the release of the May CPI report.
TDF yields also climbed on inflation concerns following implementation of a wage hike in all regions and a P1 increase in the minimum jeepney fare, Mr. Ricafort said.
Higher wages and transport costs add to a growing list of inflation risks faced by the country.
Headline inflation jumped to 5.4% in May, faster than 4.9% in April and 4.1% a year ago, as food and fuel prices continued to climb amid the prolonged Russia-Ukraine war.
This was the first time the headline print was at the 5% level since 2018.
The National Economic and Development Authority in March said a P1.25 increase in jeepney fares would increase inflation by 0.4 percentage point. A P39 increase in the daily wage in Metro Manila would lead to a one percentage point increase in inflation, it added. — K.B. Ta-asan