TDF yields mixed on inflation, Q2 GDP reports

YIELDS ON THE central bank’s term deposit facility were mixed on Wednesday following the release of data showing slower inflation and the economy’s exit from recession and as concerns remain due to the Metro Manila lockdown.

Demand for the term deposit facility (TDF) of the Bangko Sentral ng Pilipinas (BSP) reached P673.551 billion on Wednesday, surpassing the P550-billion offer as well as the P643.58 billion in bids at last week’s auction.

Broken down, bids for the seven-day papers amounted to P200.545 billion, higher than the P150 billion auctioned off by the BSP as well as the P185.592 billion in tenders logged in the previous auction.

Banks asked for yields ranging from 1.675% to 1.85%, a narrower band compared with the 1.675% to 2.02% seen a week ago. The average rate of the one-week term deposits inched sideways to 1.7376% from 1.7375% previously.

Meanwhile, the 14-day term deposits attracted tenders amounting to P473.006 billion, higher than the P400-billion offer and the P457.988 billion in tenders seen at the Aug. 4 offering.

Accepted rates for the tenor ranged from 1.71% to 1.7495%, a slimmer margin versus the 1.719% to 1.759% seen last week. This caused the average rate of the two-week papers to inch down by 0.59 basis point to 1.7389% from 1.7448% in the prior auction.

The BSP did not offer 28-day term deposits for the 42nd consecutive auction to give way to its weekly offerings of bills with the same tenor.

The TDF and the 28-day bills are used by the BSP to gather excess liquidity in the financial system and to better guide market rates.

Yields on the term deposits were mixed after the release of the July inflation and the second- quarter gross domestic product data (GDP), Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said.

“The lockdown could slow down the economy and inflation but also increased the need for liquidity buffers,” Mr. Ricafort said in a text message.

The economy grew by 11.8% year on year in the second quarter, marking the end of a 15-month recession caused by the pandemic, based on data released by the Philippine Statistics Authority (PSA) on Tuesday. It beat the 10.6% median GDP growth estimate of 20 analysts in a BusinessWorld poll last week.

The double-digit GDP growth was mainly due to base effects from the record 17% contraction in the April to June period last year when the country was under its strictest and longest lockdown.

However, the economy shrank by a seasonally adjusted 1.3% from the first quarter, reflecting the impact of the reimposed lockdown in March to April when cases surged. The economy expanded by 3.7% in the first half of the year, still below the government’s 6-7% target for 2021.

Metro Manila is under a two-week lockdown until Aug. 20 meant to curb a fresh surge in infections. Analysts have warned that recovery remains fragile due to the threat of the Delta variant and the renewed restriction measures.

Meanwhile, inflation stood at 4% in July, easing to a seven-month low and marking the first time the consumer price index fell within the BSP’s 2-4% target since the 3.5% print logged in December 2020. The slower July pace was mainly due to the slower increase in the transport index, the PSA reported last week. — L.W.T. Noble

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