Banks factor in possible rate hike in bids for BSP term deposits
Banks continued to bid aggressively for short-term deposit instruments of the Bangko Sentral ng Pilipinas, shunning the longest-dated instruments in anticipation of a likely rare hike during Monetary Board meeting to be held on Thursday.
Bids worth a total of P92.1 billion were tendered by financial institutions for the P60 billion offered by the central bank with, with only a total of P56.1 billion being accepted for the three term deposit facility tenors.
More importantly, however, yields on all three tenors of the BSP’s inflation control instrument were flat after Wednesday’s auction results, marking the first pause in their upward trajectory since mid-February – an indicator that markets have already factored in a potential interest rate hike by the central bank.
Also due to the expected rate hike, the interest of banks was heavily skewed toward the seven-day facility with banks’ P53 billion being allocated for this tenor.
The BSP made a full award of P30 billion with the average yield settling at 3.4273 percent from the previous week’s 3.4397 percent.
The 14-day instrument, meanwhile, received P33 billion worth of tenders from financial institutions for the P20 billion on offer.
The BSP made a full award with the average yield slipping slightly to 3.4551 percent, compared to last week’s 3.4648 percent.
Finally, the 28-day tenor repeated last week’s performance, being the only instrument that was undersubscribed.
Banks tendered P6.1 billion worth of bids for the P10 billion on offer. The average yield rose to 3.4732 3.4574 percent from last week’s 3.4574 percent.
BSP Governor Nestor Espenilla Jr. said regulators had been allowing the term deposit rates to rise to help cap the local inflation rate, which rose to a five-year high in April.
The BSP’s policy making Monetary Board convenes on Thursday to decide whether or not to raise interest rates after disappointing market watchers during their last two meetings in February and March by opting to keep them unchanged.
“We have allowed interest rates to move up in line with market conditions,” Espenilla said earlier, noting that average yields on the three instruments have risen by about 50 basis points over the past few weeks. /atm
