YIELDS on the Bangko Sentral ng Pilipinas’ (BSP) term deposits edged lower on Thursday as the offer was oversubscribed amid expectations of a rate cut later in the day.
Demand for the central bank’s term deposit facility (TDF) amounted to P207.389 billion on Thursday, well above the P160-billion offering as well as the P155.35 billion in bids for a P200-billion offer a week ago. The BSP made a full P160-billion award of the term deposits.
Broken down, tenders for the six-day papers reached P107.514 billion, higher than the P80 billion placed on the auction block as well as the P77.355 billion in bids for a P100-billion offering seen in the previous week. The central bank accepted P80 billion in tenders as planned.
Accepted yields ranged from 5.7% to 5.7625%, a narrower band compared with the 5.69% to 5.799% seen a week ago. With this, the average rate of the one-week term deposits declined by 1.05 basis points (bps) to 5.7518% from 5.7623% previously.
Meanwhile, the 13-day papers fetched bids amounting to P99.875 billion, above the P80-billion offer and the P77.995 billion in tenders for the P100-billion offer a week ago. This allowed the BSP to make a full P80-billion award of the tenor.
Banks asked for rates ranging from 5.7% to 5.78%, lower than the 5.72% to 5.8% margin seen last week. This caused the average rate of the two-week papers to drop by 1.47 bps to 5.751% from 5.7657% in the prior auction.
The tenors of the term deposits offered this week were adjusted as the auction date was moved due to a holiday.
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.
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.
TDF yields were lower ahead of the widely expected BSP rate cut later on Thursday, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
A BusinessWorld poll showed that all 17 analysts surveyed expected the Monetary Board to reduce its target reverse repurchase rate by 25 bps to 5.5% from the current 5.75% at its policy meeting on April 10.
This would mark the BSP’s first easing move since December after it unexpectedly kept benchmark interest rates steady in February to assess the potential impact of the Trump administration’s evolving policies on the Philippines.
The Monetary Board has brought down borrowing costs by a cumulative 75 bps since it began its easing cycle in August last year.
Mr. Ricafort added that easing inflation supports the case for further monetary easing.
“The BSP TDF auction yields also slightly eased after global crude oil prices declined recently to new lows that could help support benign inflation and future policy rate cuts,” he said.
March inflation slowed to a near five-year low of 1.8% in March from 2.1% in February.
The consumer price index averaged 2.2% in the first quarter, well within the central bank’s 2-4% annual target. — L.M.J.C. Jocson
