THE BANGKO SENTRAL ng Pilipinas’ (BSP) one-week term deposits fetched a lower average rate on Wednesday amid strong demand as weak growth data strengthened the case for further monetary easing.
Total bids for the central bank’s seven-day term deposit facility (TDF) reached P121.841 billion, exceeding the P110-billion auctioned off and the P106.037 billion in tenders for the same offer volume a week ago.
This led to a bid-to-cover ratio of 1.1076 times, up from the 0.9640 ratio recorded last week.
However, the BSP only accepted P107.441 billion in bids for the one-week papers, below the program, as it sought to keep the average yield low.
Tenders accepted had yields ranging from 4.45% to 4.5185%, slightly wider than 4.45% to 4.5125% band in the previous auction. This brought the average accepted rate to 4.4967%, edging down by 0.06 basis point (bp) from 4.4973% last week.
“The seven-day BSP TDF average auction yield was again marginally lower… after the relatively weaker local GDP growth data that somewhat increased the odds of a 25-bp BSP rate cut in the next BSP rate-setting meeting on Feb. 19,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
He added that expectations that inflation remained benign in January also support prospects of an easing move.
Philippine gross domestic product (GDP) grew by 3% in the fourth quarter, slower than 5.3% in the same period a year prior and the revised 3.9% print in the third quarter, the government reported last week.
This was the slowest quarterly print in nearly five years or since the 3.8% contraction in the first quarter of 2021. Outside of the coronavirus pandemic, this was the economy’s worst performance since the 1.8% growth recorded in the fourth quarter of 2009, or during the Global Financial Crisis.
This brought full-year 2025 GDP growth to 4.4%, below the government’s 5.5%-6.5% goal. This was slower than 2024’s 5.7% and was the weakest annual expansion since the 3.9% in 2011, counting out the 9.5% contraction in 2020 due to the pandemic.
Officials said tighter public spending and weak investor confidence due to the flood control scandal continued to drag growth.
BSP Governor Eli M. Remolona, Jr. said on Sunday that a cut is possible at the Monetary Board’s Feb. 19 policy review if the fourth-quarter GDP slowdown proves demand-driven.
“If we can help on the demand side and still keep inflation low, then of course we’ll help,” he said.
He added that they will continue to assess the available data and decide “one meeting at a time.”
The Monetary Board has slashed benchmark borrowing costs by 200 bps since August 2024, bringing the policy rate to 4.5%
Analysts said weak economic prospects and manageable inflation give the BSP room to deliver one to two more cuts this year to end its current easing cycle.
A BusinessWorld survey of 18 economists yielded a median forecast of 1.8% for the January consumer price index, within the BSP’s 1.4% to 2.2% projection for the month. That means inflation would be unchanged from December and slower than 2.9% a year earlier.
January would also mark the 11th straight month that inflation stayed below the BSP’s 2% to 4% target.
The Philippine Statistics Authority is set to release January inflation data on Thursday (Feb. 5).
The central bank uses the TDF and BSP bills to mop up excess liquidity in the financial system and better guide market rates towards the policy rate.
It last auctioned off both the seven-day and 14-day deposits on Oct. 29. It has not offered 28-day term deposits for over five years to give way to its weekly offerings of securities with the same tenor.
Based on the BSP’s latest monetary policy report, its market operations have absorbed P1.5 trillion in liquidity as of mid-November 2025, with 5.4% of this being siphoned off via the term deposit facility. — Katherine K. Chan
