The seven-day term deposits auctioned off by the Bangko Sentral ng Pilipinas (BSP) attracted P146.927 billion in tenders this week, higher than P110 billion up for sale but slightly below the P147.021 billion in bids recorded for the same offer volume previously.
As a result, the bid-to-cover ratio went down to 1.3357 times from the 1.3366 ratio seen last week.
Still, the BSP made a full P110-billion award of its offer.
Accepted rates for the one-week papers were from 4.25% to 4.7449%, a tad wider than the 4.25% to 4.74% band seen in the previous auction. This caused the weighted average accepted rate for the term deposits to rise by 5.72 basis points (bps) week on week to 4.6816% from 4.6244%.
Higher yield for the term deposit facility (TDF) of the Bangko Sentral is seen as bolstering the expectations for a hawkish turn in monetary policy locally and in the US.
The Philippine central bank has already signaled further hikes as it expects inflation to remain elevated, and he said the P85 minimum wage hike in Metro Manila could lead to additional second-round price effects.
Still, the TDF average auction rate remained below the BSP’s overnight borrowing rate of 4.75%, which was supported by the strong demand seen for the offering that likely reflects excess liquidity in the banking system.
The Monetary Board on June 18 raised benchmark interest rates by 25 bps for a second straight meeting to address persistent price pressures from the Middle East war-driven oil shock and keep inflation expectations anchored.
