Yields on term deposits decline on lower oil prices, peso’s climb

YIELDS on the central bank’s term deposits declined as oil prices fell due to worries over the impact of the lockdown in major Chinese cities on demand and as the peso appreciated in the past few days.

Total tenders for the term deposit facility amounted to P538.809 billion on Wednesday, well above the P390-billion offering as well as the P514.845 billion in bids in the previous auction.

Broken down, bids for the seven-day deposits amounted to P211.867 billion, which is higher than the P160-billion offering and the P198.738 billion in tenders last week.

Accepted rates were from 1.85% to 1.96%, slimmer than the 1.83% to 2% band seen a week ago. This caused the average rate of the one-week papers to decrease by 1.42 basis points (bps) to 1.9325% from 1.9467% previously.

Meanwhile, the 14-day papers attracted bids amounting to P326.942 billion, surpassing the P230-billion offer of the BSP as well as the P316.107 billion in tenders a week earlier.

Banks asked for yields ranging from 1.89% to 2%, a narrower band than the 1.8825% to 2.1% margin seen on March 23. With this, the average rate of the two-week deposits fell by 5.68 bps to 1.9806% from 2.0374% in the prior auction.

The central bank has not offered 28-day term deposits for more than a year to give way to its weekly auctions of securities 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.

Term deposit yields dropped following the decline in global oil prices, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

Reuters reported that fuel prices closed 2% lower on Tuesday amid the progress between Russia and Ukraine’s negotiation.

Analysts have also said that concerns over the impact of the lockdown in some Chinese cities amid the surge in coronavirus disease 2019 infections on fuel demand also caused the decline in oil prices.

On Wednesday, oil prices rebounded due to tight supply and concerns regarding new sanctions imposed by Western economies to Russia while their peace talks are ongoing.

Mr. Ricafort said term deposit facility yields were also down as the peso strengthened against the dollar recently.

The peso finished at P52.075 per dollar on Tuesday, gaining 5.5 centavos from its P52.13 close on Monday. This was the peso’s strongest finish in three weeks or since it ended at P51.74 on March 4. — Luz Wendy T. Noble with Reuters