YIELDS on the Bangko Sentral ng Pilipinas’ (BSP) term deposits went down on Wednesday amid easing inflation concerns following the implementation of government measures to tame rice prices.
The BSP’s term deposit facility (TDF) attracted bids amounting to P276.657 billion on Wednesday, below the P280 billion on the auction block as well as the P319.353 billion seen a week ago for a P240-billion offer.
Broken down, tenders for the eight-day papers reached P132.385 billion, lower than the P160 billion auctioned off by the central bank and the P189.095 billion in bids for the P140-billion offer of seven-day deposits seen the previous week. The BSP awarded P129.285 billion in one-week papers.
Accepted yields ranged from 5.735% to 5.825%, a tad narrower than the 5.725% to 5.825% band seen a week ago. This caused the average rate of the one-week deposits to inch down by 0.9 basis point (bp) to 5.7893% from 5.7983% previously.
The one-week tenor was adjusted from the usual seven-day maturity in view of the Chinese New Year holiday on Jan. 29.
Meanwhile, bids for the 14-day term deposits amounted to P144.272 billion, above the P120-billion offering and the P130.258 billion in tenders for the P100-billion offer a week ago. The central bank made a full P120-billion award.
Accepted rates were from 5.7888% to 5.8675%, narrower than the 5.75% to 5.91% margin recorded a week ago. With this, the average rate for the two-week deposits declined by 3.28 bps to 5.8347% from the 5.8675% logged in the prior auction.
The central bank has not auctioned off 28-day term deposits for more than four years to give way to its weekly offerings of securities with the same tenor.
The term deposits and the BSP bills are used by the central bank to mop up excess liquidity in the financial system and to better guide market rates.
TDF yields went down on Wednesday after the implementation of the maximum suggested retail price (SRP) on imported rice to help reduce local prices, which allayed inflation concerns, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
This week, the maximum suggested retail price on imported rice was implemented in Metro Manila. It imposes a maximum SRP of P58 per kilogram on imported rice with a 5% broken grain content.
The Agriculture department also recently announced plans to declare a food security emergency for rice amid still-elevated retail prices.
This would allow the release of buffer stocks of local rice from the National Food Authority to be sold at subsidized prices.
Benign inflation would support further BSP rate cuts, with markets expecting another reduction as early as the Monetary Board’s first policy meeting on Feb. 13, Mr. Ricafort said.
The review was rescheduled from Feb. 20 previously as BSP Governor Eli M. Remolona, Jr. is set to attend the Financial Action Task Force plenary and meetings in France on Feb. 17-20.
The has slashed benchmark borrowing costs by a total of 75 bps since it began its easing cycle in August, bringing its policy rate to 5.75%.
BSP Governor Eli M. Remolona, Jr. this month said the central bank still has room to continue cutting interest rates as inflation is well within its annual goal, adding that current benchmark borrowing costs remain “restrictive.”
He previously said 100 bps worth of cuts this year may be “too much” amid inflation concerns. — Luisa Maria Jacinta C. Jocson