Seven-day term deposits fetch lower average rate

THE BANGKO SENTRAL ng Pilipinas’ (BSP) seven-day term deposits fetched a slightly lower average yield on Wednesday as the market expects that headline inflation remained within target in February despite an anticipated pickup.

The central bank’s term deposit facility (TDF) attracted a total of P106.568 billion in bids, above the P90-billion offer but below the P117.878 billion in tenders for the same offer volume a week ago.

This translated to a lower bid-to-cover ratio of 1.1841 times from the 1.3098 ratio in the previous auction.

Still, the BSP made a full P90-billion award of its offering.

Accepted yields ranged from 4.05% to 4.28%, narrower than the 4% to 4.3% band last week. With this, the average rate of the seven-day papers slipped by 0.64 basis point (bp) week on week to 4.234% from 4.2404%.

“The seven-day term deposit facility rate remained broadly stable,” the central bank said in a statement on Wednesday.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the average accepted yield for the seven-day deposits was “marginally lower… ahead of the latest inflation data (on Thursday) that is expected to pick up from 2% in January 2026, but still benign nonetheless and still within the BSP’s inflation target of 2%-4%.”

A BusinessWorld poll of 17 analysts yielded a median estimate of 2.4% for February headline inflation.

If realized, this would be the quickest clip in 13 months or since the 2.9% in January 2025 and would be faster than the 2% recorded in January and the 2.1% in the same month in 2025.

This would mark the second straight month that the consumer price index settled within the BSP’s 2%-4% annual target and be the third consecutive month of acceleration.

Still, this is close to the low end of the central bank’s 2.3%-3.1% forecast for the month.

Mr. Ricafort said oil supply disruptions due to the conflict in the Middle East raises the risk of higher local fuel prices and import costs, which would stoke inflation and narrow the BSP’s space to ease its monetary policy stance. This could also result in second-round inflation effects like higher transport fares.

“There could be some shift to safe havens until the dust settles, as a matter of prudence, to hedge various risk exposures to be on the safe side,” he said.

Last month, the Monetary Board delivered a widely expected 25-bp cut for the sixth consecutive meeting, bringing the policy rate to 4.25% to support domestic demand as the country deals with the economic fallout from a corruption scandal that has affected consumer and investor confidence.

It has now reduced benchmark borrowing costs by a total of 225 bps since it began easing in August 2024.

BSP Governor Eli M. Remolona, Jr. has said that they are open to supporting growth through monetary policy as long as easing does not cause inflation.

However, he said that they are now less certain about the policy path ahead despite a manageable inflation outlook, adding that rate cuts may not be enough to boost the economy amid lingering governance concerns.

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.

BSP Deputy Governor Zeno Ronald R. Abenoja has said that the central bank limited its issuance of short-term papers to enhance monetary policy transmission and urge banks to better manage their liquidity.

Based on the BSP’s latest monetary policy report, its market operations have absorbed P1.5 trillion in liquidity from the market as of mid-November 2025, with 5.4% of this being siphoned off via the term deposit facility. — Katherine K. Chan