YIELDS on the Bangko Sentral ng Pilipinas’ (BSP) term deposits dropped on Wednesday following signals of a potential rate cut next month.
The central bank’s term deposit facility (TDF) fetched bids amounting to P123.926 billion on Wednesday, below the P140 billion placed on the auction block but a tad higher than the P122.771 billion for the P200-billion offer a week ago. The BSP awarded only P113.504 billion in term deposits.
Broken down, tenders for the seven-day papers reached P49.504 billion, lower than the P70 billion auctioned off by the central bank and the P61.127 billion in bids for the P90-billion offer the previous week. The BSP accepted only P43.504 billion in tenders for the tenor.
Accepted yields were from 5.7% to 5.795%, wider than the 5.74% to 5.79% band seen a week ago. This caused the average rate of the one-week deposits to inch down by 0.54 basis point (bp) to 5.7614% from 5.7668% previously.
Meanwhile, bids for the 15-day term deposits amounted to P74.422 billion, higher than the P70-billion offering and the P61.644 billion in tenders for the P110 billion auctioned off on March 19. The central bank made a full P70-billion award of the two-week tenor.
Banks asked for yields ranging from 5.7% to 5.8%, also wider than the 5.748% to 5.79% margin seen a week ago. With this, the average rate for the two-week deposits dropped by 0.77 bp to 5.7646% from 5.7723% logged in the prior auction.
The BSP 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.
Both the TDF and BSP bills are used by the central bank to mop up excess liquidity in the financial system and to better guide market rates.
Term deposit yields went down after BSP Governor Eli M. Remolona, Jr. said they could resume their monetary easing cycle as early as next month, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
Mr. Remolona said in an interview with Bloomberg Television on the sidelines of the HSBC Global Investment Summit in Hong Kong on Tuesday that there is a “good chance” that the Monetary Board will cut rates by 25 bps at their April 10 meeting, Bloomberg reported.
He reiterated that the BSP remains on an easing cycle and could bring down borrowing costs by as much as 75 bps this year depending on data.
The central bank has reduced benchmark interest rates by a cumulative 75 bps since it began its rate-cut cycle in August last year, with its policy rate currently at 5.75%.
The Monetary Board in February unexpectedly kept rates unchanged in a “prudent” move amid uncertainties stemming from the Trump administration’s policies.
TDF rates also dropped ahead of the latest round of reserve requirement ratio (RRR) cuts that will take effect on Friday, which is expected to infuse about P330 billion in liquidity into the financial system, Mr. Ricafort said.
On Friday, the RRR of universal and commercial banks and nonbank financial institutions with quasi-banking functions will be cut by 200 bps to 5% from 7%.
The reserve ratio for digital banks will go down by 150 bps to 2.5%, while the ratio for thrift lenders will be lowered by 100 bps to 0%.
Rural and cooperative banks’ RRR has been at zero since October, which was the last time the BSP cut reserve requirements. — Luisa Maria Jacinta C. Jocson
