MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) capped the increase in term deposit rates by rejecting some of the bids across all tenors at yesterday’s term deposit auction facility (TDF).
The tenor of the facility was adjusted instead of the regular seven-, 14-, and 28-day term deposits after Malacañang declared Dec. 26 as a regular holiday.
The six-day tenor fetched a record 5.1903 percent rate yesterday or 4.68 basis points higher than last week’s 5.1462 percent. Accepted yields ranged from 5.1 to 5.25 percent.
Tenders for the P30 billion seven-day term deposit offering only reached P18.71 billion, but the auction committee accepted P15.71 billion.
Likewise, the yield of the 13-day term deposits slipped 1.74 basis points to 5.2014 percent from an all-time high of 5.2188 percent last week. Bids for the P10 billion issue only reached P8.7 billion, but the BSP only awarded P6.7 billion.
On the other hand, the 27-day term deposit rate was almost unchanged at 5.2094 percent yesterday from a record 5.2092 percent last week.
The tenor was also undersubscribed as bids for the P10-billion issuance only reached P7.81 billion. The BSP auction only accepted P6.81 billion as accepted yields ranged between 5.15 percent and 5.25 percent.
The central bank slashed the volume of the TDF to P50 billion from last week’s P70 billion as banks continued to service huge demand for cash during the Christmas holiday.
The TDF was launched in June 2016 as part of the shift to the interest rate corridor (IRC) framework to guide short-term market rates towards the BSP policy interest rate. It also serves as a liquidity absorption facility of the central bank.
The central bank has lowered its inflation forecasts to 5.2 percent instead of 5.3 percent this year, 3.2 percent instead of 3.5 percent for 2019, and three percent instead of 3.3 percent for 2020 due to lower oil and food prices.
The rate-setting body expects inflation to fall below four percent and return to within the BSP’s target range as early as the first quarter instead of the first half of next year.
Inflation eased to a four-month low of six percent in November from a near-decade high of 6.7 percent in October, bringing the average to 5.2 percent from January to November and exceeding the BSP’s two to four percent target range.
The central bank also decided to keep interest rates unchanged last Dec. 13, pausing from a tightening episode that saw rates rise by 175 basis points in five straight rate-setting meetings since May this year to rein in inflation.