Term deposit yields up as market awaits Fed hike

BW FILE PHOTO

YIELDS on the term deposits of the Bangko Sentral ng Pilipinas (BSP) went up on Wednesday, with market players positioning ahead of an expected hike from the US Federal Reserve and the national elections.

Total demand for the term deposit facility (TDF) of the central bank amounted to P296.062 billion on Wednesday, well above the P270-billion offering as well as the P276.324 billion in bids a week ago.

Broken down, tenders for the seven-day papers reached P139.258 billion, surpassing the P100-billion auctioned off by the BSP as well as the P102.146 billion in bids the previous week.

Banks asked for yields ranging from 1.89% to 2.0222%, a narrower band than the 1.85% to 2.18% seen a week ago. With this, the average rate of the one-week term deposit inched up by 0.02 basis point (bp) to 1.9597% from 1.9595% previously.

Meanwhile, the 14-day papers fetched bids amounting to P156.804 billion, lower than the P170-billion offer as well as the P174.158 billion in tenders logged a week ago.

Accepted rates for the tenor were from 1.925% to 2.37%, thinner than the 1.84% to 2.39% range seen on April 27. This caused the average rate of the two-week papers to increase by 6.72 bps to 2.0352% from 1.968% 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.

Both the TDF and 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 rose ahead of an expected rate hike from the US Federal Reserve, 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 another rate hike at its May 3-4 review following the 25-bp increase it made in March.

Fed Chairman Jerome H. Powell has said they will consider increasing borrowing costs by a bigger 50 bps to help tame inflation that has reached multi-decade highs.

Fed policy makers are looking set to deliver a series of aggressive interest rate hikes at least until the summer, Reuters reported.

There won’t be economic or dot plot projections at this meeting, but the market will pay close attention to Mr. Powell’s press conference for clues on interest rates and balance sheet reduction.

Higher TDF yields were also seen ahead of the national elections on Monday, Mr. Ricafort added.

Former Senator Ferdinand R. Marcos, Jr., who faces tax evasion allegations, remains the frontrunner for the presidency based on the latest round of surveys.

Meanwhile, a Bloomberg poll of analysts showed analysts and investors want Vice-President Maria Leonor G. Robredo, the second leading candidate, to become the country’s next chief executive. — L.W.T. Noble with Reuters

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