TERM DEPOSIT YIELDS dropped further on Wednesday as the offer fetched strong demand and amid bets that the Bangko Sentral ng Pilipinas (BSP) will continue its easing cycle as June inflation likely remained within target despite a likely uptick due to the Middle East conflict.
Total bids for the central bank’s term deposit facility (TDF) reached P211.651 billion, well above the P130 billion placed on the auction block and the P112.339 billion in tenders seen last week for a P100-billion offer. The central bank fully awarded its term deposit offering.
Broken down, tenders for the seven-day term deposits stood at P117.092 billion, almost double the P60 billion placed on the auction block and higher than the P65.808 billion in bids seen last week for a P50-billion offer. The BSP made a full P60-billion award of the one-week tenor.
Banks asked for yields ranging from 5.2% to 5.295%, narrower than the 5.1% to 5.385% margin seen last week. This caused the average rate of the one-week term deposits to go down by 2.53 basis points (bps) to 5.276% from 5.3013% a week ago.
Meanwhile, the 14-day papers attracted bids worth P94.559 billion, above the P70 billion auctioned off by the BSP and the P46.531 billion in tenders fetched for the P50 billion on offer last week. The central bank fully awarded P70 billion worth of the two-week tenor.
Accepted rates were from 5.2% to 5.39%, lower and tighter than the 5.25% to 5.53% range recorded a week ago. As a result, the average yield of the 14-day deposits went down by 6.93 bps to 5.3424% from the 5.4117% fetched last week.
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.
The TDF and BSP bills are used by the central bank to mop up excess liquidity in the financial system and to better guide market yields closer to the policy rate.
“The BSP TDF average auction yields again declined amid the continuing effects of the latest 25-bp BSP rate cut on June 19 and signals of another 25-bp cut for the rest of 2025,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
Mr. Ricafort noted that the TDF average rates seen on Wednesday are now closer to the 5.25% policy rate.
The BSP last month slashed the target reverse repurchase rate by 25 bps to 5.25%. The Monetary Board has reduced borrowing costs by a cumulative 125 bps since it kicked off its easing cycle in August last year.
BSP Governor Eli M. Remolona, Jr. said they could deliver another 25-bp cut this year. The Monetary Board’s remaining policy meetings this year are scheduled for Aug. 28, Oct. 9, and Dec. 11.
Further rate cuts are likely to be supported by the continued decline in global oil prices after Iran and Israel agreed to a ceasefire last month, Mr. Ricafort said, with domestic inflation expected to remain benign despite an expected uptick in June.
A BusinessWorld poll of 17 analysts yielded a median estimate of 1.5% for the June consumer price index, up from 1.3% in May but still below the BSP’s 2-4% annual target. This would also be slower than the 3.7% print in June 2024 and is within the BSP’s June forecast of 1.1% to 1.9%. — A.M.C. Sy
