YIELDS on the Bangko Sentral ng Pilipinas’ (BSP) term deposits dropped further on Wednesday as the offer was met with strong demand amid expectations that borrowing costs will continue to go down.
Bids for the central bank’s term deposit facility (TDF) amounted to P125.644 billion, above the P100 billion placed on the auction block and the P108.193 billion in bids for the P90 billion offered a week ago. The BSP made a full award of the papers.
Broken down, the seven-day deposits attracted P53.122 billion in bids, higher than the P50-billion offer but below the P58.145 billion in tenders for the P40 billion auctioned off last week.
Accepted rates for the one-week securities were from 5% to 5.09%, wider than the 5.05% to 5.09% margin a week earlier. With this, the weighted average accepted yield for the seven-day tenor declined by 1.13 basis points (bps) to 5.0634% from 5.0747% last week.
Meanwhile, tenders for the 14-day papers reached P72.522 billion, well above the P50 billion placed on the auction block and the P54.678 billion in bids recorded for the same offer volume last week.
The BSP accepted bids carrying yields from 4.98% to 5.1125%, lower than the 5% to 5.14% band last week. As a result, the average rate of the two-week tenor went down by 0.94 bp to 5.0918% from 5.1074% previously.
The BSP has not auctioned off 28-day term deposits for nearly five 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 better guide market rates towards the policy rate.
Yields on term deposits continued to go down as both the BSP and the US Federal Reserve are expected to continue loosening their policy settings, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
“The series of BSP rate cuts in recent months and possible BSP and Fed rate cuts in the coming months led more investors to lock in yields before they go down further…,” he said.
The Monetary Board on Aug. 28 slashed borrowing costs by 25 bps for a third straight meeting to bring the policy rate to 5%. This brought cumulative cuts since August 2024 to 150 bps.
BSP Governor Eli M. Remolona, Jr. has said they could deliver one more cut this year — which would likely be its last reduction for this easing cycle — to support the economy and if inflation remains manageable.
Meanwhile, the Fed last month lowered its target rate by 25 bps to the 4%-4.25% range, which was its first cut since December. This brought its total reductions since September 2024 to 125 bps. Its “dot plot” showed projections of two more rate cuts this year.
Market volatility also led some funds to shift to other instruments, which likely contributed to the strong demand seen for the term deposits, Mr. Ricafort added.
JPMorgan Chase & Co.’s move to place the Philippines in its positive watchlist for its Government Bond Index for Emerging Markets (GBI-EM) series last month also supported sentiment, he said. This is the final review phase for potential inclusion in the bank’s GBI-EM Global Diversified Index. — A.M.C. Sy
