Philippines: Term deposit yields drop as inflation slows

MANILA, Philippines — Term deposit rates eased across the board anew as inflation slowed down in March amid the reimposition of enhanced community quarantine in the National Capital Region (NCR) and nearby provinces.

The yield of the seven-day tenor slipped by 4.38 basis points to 1.7842 percent at the term deposit facility (TDF) auction by the Bangko Sentral ng Pilipinas (BSP) yesterday from last week’s 1.828 percent.

Likewise, the 14-day term deposits rate eased by 2.97 basis points to 1.8431 percent from 1.8728 percent.

Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said the decline in rates could be attributed to lower-than-expected 4.5 percent inflation for March as well as the easing of inflationary pressures as the government imposed the strict lockdown and quarantine measures from March 29 to April 11.

Ricafort also said the pressure for the national government to borrow from the domestic market has been reduced after successfully raising $500 million via the issuance of three-year samurai bonds last week.

He said term deposit yields also eased further as the global oil prices fell to one-month lows together with the benchmark US Treasury yield easing to one-month low.

Both tenors were oversubscribed given ample liquidity in the financial system, with tenders hitting P651.1 billion versus the reduced P480 billion offering.

Bids for the seven-day tenor amounted to P191.73 billion versus the P140 billion volume, while tenders for the 14-day term deposits reached P459.38 billion versus the P340 billion offering.

Last March 25, the Monetary Board decided to keep interest rates at record lows.

However, it raised its inflation forecasts to 4.2 percent instead of four percent for this year and 2.8 percent instead of 2.7 percent for next year.