THE BANGKO SENTRAL ng Pilipinas’ (BSP) seven-day term deposits fetched a lower average rate on Wednesday as the offer was oversubscribed, with below-target November inflation bolstering bets on another rate cut this week.
Bids for the central bank’s term deposit facility (TDF) reached P156.981 billion on Wednesday, nearly double the P80 billion placed on the auction block and higher than the P135.643 billion in tenders for the same offer volume a week ago. The BSP made a full P80-billion award of the seven-day papers.
Accepted yields ranged from 4.52% to 4.724%, wider and lower than the 4.6% to 4.7408% band logged in the previous auction. With this, the average rate of the one-week deposits declined by 4.82 basis points (bps) to 4.6798% from 4.728% last week.
The BSP fully awarded its term deposit offering on strong demand, it said in a statement.
“Demand for the seven-day term deposit facility increased,” the central bank said. “The BSP maintained the offer volume at P80 billion, resulting in a bid-to-cover ratio of 1.96x.”
This was higher than the 1.7x bid-to-cover ratio seen the previous week.
The BSP did not offer the 14-day term deposits for a sixth auction in a row, as it last offered both the seven-day and 14-day papers on Oct. 29.
Meanwhile, it has not auctioned off 28-day term deposits for more than 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.
“The BSP seven-day TDF auction yield again slightly declined week on week, now at 4.6798%, even slightly below the key BSP overnight rate at 4.75%, after better-than-expected headline inflation data in November 2025, still below the BSP’s inflation target of 2-4% [and] thereby could justify another 25-bp BSP rate cut on Dec. 11,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
He added that the strong demand for the offering came as investors likely wanted to lock in “still relatively high” yields amid expectations of further monetary easing.
Headline inflation eased to 1.5% last month from 1.7% in October and 2.5% in November 2024, the Philippine Statistics Authority reported last week. This was within the BSP’s 1.1-1.9% forecast for the month, but was slightly below the 1.6% median estimate in a BusinessWorld poll of 15 analysts.
The November clip brought the 11-month average to 1.6%, below the central bank’s 1.7% full-year forecast and 2-4% annual goal.
Analysts said the below-target inflation print gives the BSP room to ease its policy settings further, with another cut likely at the Monetary Board’s meeting on Thursday (Dec. 11).
A BusinessWorld poll showed that 17 of 18 analysts expect the central bank to deliver a fifth straight 25-bp reduction at this week’s meeting to bring the policy rate to 4.5%, its lowest since September 2022.
Meanwhile, one analyst said the Monetary Board could announce a jumbo 50-bp cut.
The BSP has cut benchmark borrowing costs by a total of 175 bps since it kicked off its easing cycle in August 2024. BSP Governor Eli M. Remolona, Jr. said last week that weakening growth prospects raise the chances of a cut on Thursday, adding that they expect Philippine gross domestic product (GDP) to expand by just 4-5% this year, below the 5.5-6.5% target.
He earlier said that they could continue cutting rates until next year to help provide economic stimulus as a graft scandal involving anomalous flood control and infrastructure projects has caused a slowdown in public spending and dampened consumer and investor confidence.
In the third quarter, Philippine GDP grew by an over four-year low of 4%, bringing the nine-month average to 5%.
Mr. Ricafort said expectations of a rate cut by the US Federal Reserve also caused TDF yields to go down.
The Fed was due to announce its policy decision at the end of its two-day meeting overnight. A rate cut is largely priced in, but markets will monitor the statement of Fed Chair Jerome H. Powell for clues on the central bank’s future policy path. — Katherine K. Chan
