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Philippines: Term deposit rates fall as liquidity returns
MANILA, Philippines — The yields of term deposits fell across the board anew as liquidity has started to return to the financial system after the Christmas and New Year holidays, according to the Bangko Sentral ng Pilipinas (BSP).
The seven-day term deposits fetched 4.1641 percent at the term deposit auction facility (TDF) yesterday, 7.04 basis points lower than last week’s 4.2345 percent.
The yield of the 14-day tenor eased by 6.81 basis points to 4.2364 percent from 4.3045 percent, while the rate for the 28-day term deposits declined by 5.98 basis points to 4.2704 percent from 4.3302 percent.
Total bids across all tenors for yesterday’s auction reached P276.22 billion, more than twice the issue size of P120 billion.
Bids for the seven-day tenor reached P102.18 billion or more than double the issue size of P40 billion, while tenders for the 14-day term deposits amounted to P88.91 billion or twice the volume of P40 billion.
Likewise, tenders for the 28-day tenor reached P88.91 billion, also twice the issue size of P40 billion.
The BSP auction committee has started to raise the volume of the liquidity absorption facility with the return of liquidity after the huge demand for cash during the Christmas and New Year holidays.
Economists expect the central to resume its easing cycle this year after a prudent pause in the last few months of the year to allow previous monetary actions to work its way through the economy.
Benign inflation environment and slower than expected gross domestic product (GDP) growth allowed the BSP to slash interest rates by 75 basis points last year, partially unwinding a tightening cycle that saw rates jump by 175 basis points in 2018 as inflation spiraled out of control.
It also lowered the reserve requirement ratio for big and mid-sized banks by 400 basis points and for small banks by 200 basis points to free up additional funds into the financial system to boost the economy.
The BSP has committed to lower the level of deposits banks are required to keep with the central bank to single digit by 2023. The level has been reduced by 600 basis points to 14 percent from 20 percent in 2020.
Inflation averaged 2.5 percent last year from 5.2 percent in 2018 due to lower oil and rice prices as well as the strong peso.
For 2020 and 2021, inflation is expected to accelerate to 2.9 percent.
Source: https://www.philstar.com/business/2020/01/09/1983171/term-deposit-rates-fall-liquidity-returns