BSP easing bets pull down term deposit yields

THE Bangko Sentral ng Pilipinas’ (BSP) seven-day term deposits fetched a lower average yield on Wednesday as the offer was oversubscribed.

Bids for the central bank’s term deposit facility (TDF) reached P128.312 billion, exceeding the P80 billion auctioned off but lower than the P162.089 billion in tenders for the same offer volume a week ago. The BSP fully awarded P80 billion in seven-day deposits.

Accepted yields were from 4.6% to 4.7497%, narrower than the 4.6% to 4.7515% band recorded in the previous auction. This caused the average rate of the one-week papers to go down by 0.61 basis point (bp) to 4.7374% from 4.7435%.

This was the fourth week in a row that the central bank did not offer 14-day deposits. It has likewise not auctioned off 28-day term deposits for 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.

Term deposit yields continued to go down on expectations of further BSP rate cuts due to weakening economic prospects, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

“The policy priority is boosting economic growth through monetary easing measures, particularly through BSP rate cuts to reduce borrowing costs to increase demand for credit that increase investments, employment, and other economic activities that lead to faster economic growth,” he said.

BSP Governor Eli M. Remolona, Jr. last week said they could deliver a fifth straight 25-bp cut at the Monetary Board’s Dec. 11 meeting to support the economy following the slower growth seen last quarter as a corruption mess involving state infrastructure projects hit consumer and investor confidence.

The central bank has lowered benchmark borrowing costs by a total of 175 bps since it kicked off its easing cycle in August 2024, with the policy rate now at 4.75%. — Katherine K. Chan