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Yields on term deposits drop on euro bond issue

yields on term deposits drop on euro bond issue 816x445 - Yields on term deposits drop on euro bond issue

TERM DEPOSIT yields continued to slip on Wednesday following the government’s issuance of euro-denominated bonds.

Bids for the term deposit facility (TDF) of the Bangko Sentral ng Pilipinas (BSP) totaled P298.656 billion on Wednesday, surpassing the P200 billion on the auction block, according to data from the central bank.

However, this week’s total tenders slipped compared to the P274.15 billion worth of tenders attracted last week against the P160 billion up for sale.

Total bids for the one-week term deposits clocked in at P134.77 billion, going beyond the P80 billion on offer and also beyond the P95.282 billion worth of tenders seen on Jan. 15 against the P60 billion on offer.

Rates for the seven-day papers ranged from 4% to 4.05%, a narrower band compared to the 4%-4.125% seen a week ago. The average rate for the papers clocked in at 4.0301%, down by 5.5 basis points (bps) from last week’s 4.0851%

Meanwhile, bids for the two-week deposits amounted to P76.564 billion, higher than the P60 billion auctioned off by BSP but failing to beat the P103.847 billion in bids seen last week for the P50 billion up for grabs.

Banks sought for returns from 4% to 4.1%, a slimmer band compared to the 4% to 4.15% range seen on Jan. 15. This brought the average rate for the two-week term deposits at 4.053%, falling by 5.35 bps from the 4.1065% seen a week ago.

The 28-day papers were also oversubscribed at P87.322 billion against the P60 billion up for grabs, likewise beating the P75.021 billion in tenders on Jan. 15 for the P50-billion offer.

Lenders asked for yields ranging from 4.044% to 4.13%, a slimmer band compared to the 4.0795% to 4.22% margin seen last week. This caused the average rate for 28-day term deposits to settle at 4.0917%, down 5.85 bps from the 4.1502 traced last week.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the lower yields may have been on the back of the Bureau of the Treasury’s euro bond offering.

“The renewed decline in BSP TDF auction yields could be partly brought about by the latest euro-denominated bond issuance by the Philippine government that may have partly helped in easing the recent upward pressure on local interest rate benchmarks in the secondary market since the start of 2020,” Mr. Ricafort said in an e-mail.

The government raised €1.2 billion from its offer of two tenors of euro-denominated bonds following strong demand from investors, with the three-year papers priced at a near-zero coupon.

National Treasurer Rosalia V. de Leon said on Wednesday that they sold €600 million each for the two tenors, — three years and nine years — causing the government to upsize its issue from the initial plan of a benchmark size issuance worth €500 million.

The offer was oversubscribed by more than three times than the initial program, with total bids coming in at €4.3 billion.

The three-year bonds were priced at a rate of 0.1%, while the nine-year papers carry a coupon of 0.75%, a spread of 40 bps and 70 bps over benchmark rates, respectively.

On Tuesday, Deputy Treasurer Erwin D. Sta. Ana said it is possible that more offshore bond issuances may be done in the first half of the year, subject to market conditions. Possible offerings may include dollar, yuan and yen bonds, he said. — Luz Wendy T. Noble

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