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TDF yields end mixed on dovish BSP signals

tdf yields end mixed on dovish bsp signals - TDF yields end mixed on dovish BSP signals

YIELDS ON term deposits offered by the Bangko Sentral ng Pilipinas (BSP) on Wednesday were mixed following signals that the regulator could maintain a low interest rate environment and on window-dressing ahead of the year’s close.

Demand for the central bank’s term deposit facility (TDF) amounted to P531.223 billion on Wednesday, surpassing the P490 billion on the auction block but falling below the P570.33 billion in bids logged the previous week.

Broken down, bids for the six-day term deposits reached P159.937 billion, lower than the P170-billion offering as well as the P235.871 billion in tenders a week ago.

Banks asked for yields ranging from 1.65% to two percent, a wider band than the 1.65% to 1.7296% seen in the previous auction. This caused the tenor’s average rate to settle at 1.7115%, inching up by 0.69 basis point (bp) from the 1.7046% seen last week.

Meanwhile, the two-week papers were met with bids worth P371.286 billion, going beyond the P320 billion auctioned off by the central bank and the P334.459 billion in tenders seen at last week’s offering.

Accepted yields on the 14-day deposits ranged from 1.6% to 1.7444%, lower than last week’s 1.65% to 1.76% band. With this, the tenor’s average rate slipped 1.6 bps to 1.7003% from 1.7163% on Dec. 16.

The central bank did not offer 28-day term deposits for the 11th straight auction. This follows the start of the BSP’s weekly offerings of its own bills with the same tenor.

The TDF and BSP securities are tools used by the central bank to mop up excess liquidity in the financial system and to better guide market interest rates.

TDF yields were mixed at Wednesday’s offer following signals from BSP Governor Benjamin E. Diokno that the central still has policy space and that it could maintain a low interest rate environment until end-2022, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said.

Mr. Diokno said in a Bloomberg Television interview on Tuesday that it remains committed to keep low interest rates to provide support for the economy’s recovery from the pandemic.

The central bank cut benchmark rates by 200 bps this year. This brought the rates on the BSP’s overnight reverse repurchase, lending, and deposit facilities to record lows of 2%, 2.5%, and 1.5%, respectively.

Aside from Mr. Diokno’s remarks, Mr. Ricafort said the TDF yields also reflect investors’ window-dressing activities as the year comes to a close.

“In view of this, there was some reduction in bids for the seven-day TDF, while bids for the 14-day tenor were higher week-on-week, partly leading to the latest easing of the 14-day TDF auction yield,” he said. — L.W.T. Noble

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