TERM DEPOSIT YIELDS went down on Wednesday as markets anticipate further policy easing from the Bangko Sentral ng Pilipinas (BSP) amid the improving inflation outlook.
The BSP’s term deposit facility (TDF) attracted bids amounting to P106.524 billion on Wednesday, above the P90 billion on the auction block but lower than the P137.272 billion in tenders seen a week ago for the same volume offer.
Still, the central bank awarded only P84.154 billion in deposits as the one-week tenor was undersubscribed.
Broken down, tenders for the seven-day papers reached just P46.254 billion, below the P50 billion auctioned off by the central bank and the P75.514 billion in bids for the same volume offered the previous week. The BSP awarded only P44.154 billion in one-week deposits.
Accepted rates ranged from 5.5% to 5.56%, a tad higher than the 5.49% to 5.5575% band seen a week ago. With this, the average rate of the one-week deposits slipped by 0.69 basis point (bp) to 5.5366% from 5.5435% previously.
Meanwhile, bids for the 14-day term deposits amounted to P60.27 billion, well above the P40-billion offering but lower than the P61.758 billion in tenders for the same volume auctioned off a week ago. The central bank made a full P40-billion award of the two-week tenor.
Banks asked for yields ranging from 5.5% to 5.585%, narrowing from the 5.5% to 5.625% margin recorded a week ago. This caused the average rate for the two-week deposits to fall by 3.16 bps to 5.5568% from the 5.5884% 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.
Term deposit yields were lower after dovish signals from the central bank following the sharply slower April inflation print, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said.
Headline inflation eased to 1.4% in April from 1.8% in March and 3.8% a year ago. This was the lowest print in over five years.
For the first four months of 2025, inflation averaged 2%.
The central bank said this manageable inflation outlook will “allow for a shift toward a more accommodative monetary policy stance.”
BSP Governor Eli M. Remolona, Jr. told Bloomberg they are open to cutting rates by an additional 75 bps this year amid cooling inflation.
Last month, the Monetary Board resumed its easing cycle with a 25-bp cut, bringing the policy rate to 5.5%. It has now reduced borrowing costs by a cumulative 100 bps since August last year.
“BSP TDF average auction yields slightly eased after generally peaceful election results,” Mr. Ricafort added.
Lower political risk leads to lower risk premium and lower Treasury bill yields, he said. “All point to lower borrowing costs for the government.”
The midterm elections were held on Monday where the seats for 12 senators, more than 300 congressmen and nearly 18,000 local officials were up for grabs. — Luisa Maria Jacinta C. Jocson
