TDF yields inch up on lower bids, inflation worries
YIELDS on the term deposits auctioned off by the Bangko Sentral ng Pilipinas (BSP) inched higher on Wednesday as the offer went undersubscribed and amid renewed inflation concerns after a typhoon hit the Philippine capital.
Demand for the BSP’s term deposit facility (TDF) totaled P121.893 billion on Wednesday, lower than the P250 billion placed on the auction block and the P181.978 billion in tenders seen for a P240-billion offer last week.
Broken down, the seven-day deposits attracted tenders amounting to P51.047 billion, lower than the P120-billion offering as well as the P99.977 billion in bids recorded the prior week.
Rates for the one-week papers ranged from 6.4925% to 6.525%, a tad narrower and lower than the 6.495% to 6.53% range recorded in the previous week. This brought the average rate for the tenor to 6.5161%, inching up by 0.63 basis point (bp) from the 6.5098% seen on July 26.
Meanwhile, tenders for the 14-day deposits reached P70.846 billion, below the P130-billion offering and the P82.001 billion in bids last week for the P120 billion placed on the auction block.
Accepted yields were from 6.52% to 6.575%, wider than the 6.53% to 6.565% margin logged a week prior. This brought the average rate of the two-week deposits to 6.5494%, up by 0.48 bp from the 6.5446% logged last week.
The central bank has not auctioned off 28-day term deposits for more than three years to give way to its weekly offerings 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 slightly higher week on week on Thursday as the market expects inflation to accelerate due to the impact of Typhoon Carina (Gaemi) and a southwest monsoon that caused torrential rains in Metro Manila and its nearby provinces, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
“Most BSP TDF average auction yields mostly corrected slightly higher after the typhoon damage by Typhoon Carina that could lead to some temporary pickup in prices,” Mr. Ricafort said.
Latest data from the Agriculture department showed that agricultural damage due to the typhoon and southwest monsoon hit P1.21 billion as of July 31.
Rice was the most affected crop, accounting for 52.47% of the damage or P635.17 million.
The BSP’s month-ahead forecast showed that inflation likely settled within 4% to 4.8% in July. If realized, this would be faster than the 3.7% print in June.
The upper end of the central bank’s forecast would also mark the first time in seven months that inflation breached the BSP’s 2-4% annual target.
July inflation data will be released on Aug. 6.
“BSP TDF auction yields also corrected slightly higher after lower total bids compared to the previous week,” Mr. Ricafort added. — Luisa Maria Jacinta C. Jocson