YIELDS on the term deposits auctioned off by the Bangko Sentral ng Pilipinas (BSP) inched higher on Wednesday following the release of minutes of the US Federal Reserve’s latest policy meeting.
Demand for the BSP’s term deposit facility (TDF) reached P333.647 billion on Wednesday, higher than the P330 billion on the auction block and P305.484 billion in bids logged last week.
Broken down, the seven-day deposits attracted tenders amounting to P194.346 billion, lower than the P200-billion offering but above the P179.794 billion in bids recorded the prior week.
Rates for the one-week papers ranged from 6.6% to 6.75%, higher than the 6.55% to 6.7399% range last week. This brought the average rate for the tenor to 6.6786%, inching up by 3.13 basis points (bps) from 6.6473% seen on Nov. 15.
For the 14-day deposits, tenders hit P139.301 billion, above the P130-billion offering and the P125.69 billion in bids last week.
Accepted yields were from 6.6% to 6.7680%, narrower than the 6.585% to 6.775% range in the previous week. This brought the average rate of the two-week deposits to 6.6896%, up by 1.97 bps from the 6.6699% logged a week ago.
The central bank has not auctioned off 28-day term deposits for three years 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 were higher on Wednesday following the release of minutes of the Fed’s policy meeting on Oct. 31 to Nov. 1, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
US Federal Reserve officials agreed at their last policy meeting that they would proceed “carefully” and only raise interest rates if progress in controlling inflation faltered, the minutes of the Oct. 31-Nov. 1 gathering showed on Tuesday, Reuters reported.
“All participants agreed that the Committee was in a position to proceed carefully,” according to the minutes, which appeared to show support for more rate hikes dissipating within the US central bank’s Federal Open Market Committee, and the baseline shifting to one in which its benchmark overnight interest rate remains steady absent a bad inflation surprise.
Inflation has been slowing — consumer prices did not rise at all on a month-to-month basis in October — and while the Fed has not declared its fight against rapid price increases over, the tenor of the discussion has been shifting towards a focus on how long to keep the policy rate in the current 5.25%-5.5% range.
Mr. Ricafort also attributed the rise in TDF yields to some pickup in local and world rice prices, as they expect the El Niño weather phenomenon to affect the crop until the first quarter next year.
The BSP earlier said the El Niño weather event could dampen water resources and agricultural productivity in the first half next year, which could affect inflation next year.
During its Nov. 16 policy meeting, the BSP raised its baseline inflation forecast to 6% in 2023 from 5.8% in September and to 3.7% in 2024 from 3.5%, but trimmed its 2025 inflation estimate to 3.2% from 3.4%.
Headline inflation fell to a three-month low of 4.9% in October from 6.1% in September. It was significantly slower than the 5.7% median estimate in a BusinessWorld poll and the 5.1-5.9% forecast of the central bank. However, October marked the 19th straight month that inflation breached the central bank’s 2-4% target.
For the first 10 months, inflation averaged 6.4%. — Keisha B. Ta-asan