YIELDS on the Bangko Sentral ng Pilipinas’ (BSP) term deposits went down on Wednesday after the US Federal Reserve delivered another rate cut last week.
The BSP’s term deposit facility (TDF) attracted bids amounting to P291.099 billion on Wednesday, higher than the P230 billion on the auction block as well as the P250.427 billion seen a week ago for a P210-billion offer.
Broken down, tenders for the seven-day papers reached P155.328 billion, higher than the P130 billion auctioned off by the central bank and P133.311 billion in bids for a P120-billion offer seen the previous week.
Banks asked for yields ranging from 5.955% to 6.1%, slightly narrower than the 5.955% to 6.13% band seen a week ago. This caused the average rate of the one-week deposits to inch down by 0.68 basis point (bp) to 6.0824% on Wednesday from 6.0892% previously.
Meanwhile, bids for the 14-day term deposits amounted to P135.771 billion, above the P100-billion offering and the P117.116 billion in tenders for the P90 billion placed on the auction block a week ago.
Accepted rates for the tenor were from 6.1167% to 6%, wider than the 6.1281% to 6% margin recorded a week ago. With this, the average rate for the two-week deposits fell by 1.14 bps to 6.1167% from the 6.1281% logged in the prior auction.
The central bank has not auctioned off 28-day term deposits for more than four years to give way to its weekly offerings of securities with the same tenor.
The term deposits and the BSP bills are used by the central bank to mop up excess liquidity in the financial system and to better guide market rates.
TDF yields went down on Wednesday after the US central bank’s policy decision last week, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
“Any possible protectionist Trump policies could reduce future Fed rate cuts and, in turn, could also reduce local policy rate cuts,” Mr. Ricafort added.
The Federal Reserve cut interest rates by a quarter of a percentage point last week as its policy makers began taking stock of what could become a more complex economic landscape when US President-elect Donald J. Trump takes office next year, Reuters reported.
Fed Chair Jerome H. Powell said the results of the presidential election, which paved the way for a US chief executive who has pledged widespread deportation of immigrants, broad-based tariffs, and tax cuts, would have no “near-term” impact on US monetary policy.
Mr. Powell said the Fed will continue assessing data to determine the “pace and destination” of interest rates as officials reset currently tight monetary policy to account for inflation that has slowed markedly in the past year and is nearing the US central bank’s 2% target.
But as the new administration’s proposals take shape, the Fed chief said the central bank would begin estimating the impact on its twin goals of stable inflation and maximum employment.
“It’s a process that takes some time,” said Mr. Powell, who spoke in a press conference following the Fed’s decision to reduce its benchmark overnight interest rate to the 4.5%-4.75% range. “It’s all of the policy changes that are happening. What’s the net effect? The overall effect on the economy at a given time? That’s a process… we go through all the time with every administration.”
For now, at least, both inflation and interest rates are moving lower in line with a Fed outlook that sees price pressures continuing to ease amid ongoing economic growth and a job market the central bank says has “generally eased” but remains healthy.
Mr. Powell said for now the economic outlook was solid and the Fed hoped to keep it that way.
“This further recalibration of our policy stance will help maintain the strength of the economy and the labor market, and will continue to enable further progress on inflation as we move toward a more neutral stance over time,” Mr. Powell said.
The Fed’s policy statement noted that risks to the job market and inflation were “roughly in balance,” repeating language from the statement released after its Sept. 17-18 meeting.
The new statement also slightly altered the reference to inflation, saying that price pressures had “made progress” towards the Fed’s objective, rather than the prior language that it had “made further progress.”
Mr. Powell said that the language change was not meant to signal that inflation has been sticky. The Fed, he said, has always expected progress to be bumpy, and policy makers have gained confidence that inflation is on a sustainable path to the 2% goal. — Luisa Maria Jacinta C. Jocson with Reuters
