Term deposit yields higher on rate cut hint

MANILA, Philippines — Term deposits fetched higher yields across all tenors after Bangko Sentral ng Pilipinas Governor Benjamin Diokno signaled another 25 basis points reduction in interest rates before the end of the year.

The seven-day tenor fetched a higher rate of 2.55 basis points to 4.4852 percent yesterday from last week’s 4.4597 percent, while the yield of the 14-day term deposits increased by 1.17 basis points to 4.5055 percent from 4.4938 percent.

Likewise, the yield of the 28-day tenor went up by 2.19 basis points to 4.4832 percent from 4.4613 percent.

The term deposit auction facility (TDF) was slightly oversubscribed with tenders reaching P102.99 billion versus the volume of P100 billion.

The liquidity absorption facility was undersubscribed with bids reaching P76.75 billion versus the issue size of P80 billion.

Bids for the seven-day tenor reached P19.23 billion, slightly lower than the lowered volume of P20 billion, while tenders for the 28-day term deposits amounted to P33.2 billion or lower than the revised size of P40 billion.

On the other hand, the 14-day tenor was oversubscribed with bids reaching P24.32 billion, higher than the P20-billion issuance.

BSP Deputy Governor Francisco Dakila Jr. attributed the undersubscription to the banks’ preference to hold on to their cash in view of the month-end liquidity requirements.

Diokno, on Tuesday, hinted of another rate reduction of 25 basis points before the end of the year as inflation is seen falling below two percent in the third quarter.