YIELDS on term deposits eased further on Wednesday after the Bangko Sentral ng Pilipinas (BSP) delivered its third straight rate cut last week.
The BSP’s term deposit facility (TDF) fetched bids amounting to P98.18 billion, slightly below the P100 billion placed on the auction block but higher than the P74.45 billion in tenders for the P80 billion offered a week earlier.
However, the central bank only awarded P89.548 billion in papers as the one-week tenor went undersubscribed for the sixth straight week.
Broken down, the seven-day term deposits attracted only P39.548 billion in tenders, lower than the P50-billion offer but more than the P28.675 billion in bids recorded for the P40 billion placed on the auction block last week. The central bank accepted all the submitted bids.
Banks asked for rates ranging from 4.96% to 5.2498%, lower and wider than the 5.165% to 5.27% margin logged a week ago. With this, the weighted average accepted yield for the seven-day deposits declined by 13.74 basis points (bps) to 5.1101% from 5.2475% previously.
Meanwhile, bids for the 14-day deposits amounted to P58.632 billion, above the P50 billion offered by the central bank and the P45.775 billion in tenders seen for the P40 billion auctioned off a week prior. The BSP fully awarded P50 billion in two-week papers.
Accepted yields ranged from 5.05% to 5.19%, lower than the 5.24% to 5.2799% band seen a week earlier. This caused the average rate for the 14-day papers to fall by 13.81 bps to 5.1294% from 5.2675% 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.
Both 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 rates towards the policy rate.
“BSP TDF average auction yields were again slightly lower after the widely expected 25-bp BSP rate cut on Aug. 28,” Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said in a Viber message.
Signals of potentially one more cut this year from monetary officials also affected TDF rates, he added.
The Monetary Board last week trimmed the target reverse repurchase rate by 25 bps for a third straight meeting to 5%, as expected by all 20 analysts in a BusinessWorld poll.
The BSP has so far slashed borrowing costs by 150 bps since it began its easing cycle in August 2024.
BSP Governor Eli M. Remolona, Jr. said after last week’s policy meeting that the latest cut puts the policy rate at a “sweet spot” in terms of both inflation and output, signaling that the central bank is nearing the end of its rate-cut cycle.
However, he left the door open to one last reduction within this year to support the economy if needed.
Finance Secretary Ralph G. Recto on Tuesday also said another cut is possible before yearend, depending on economic data.
The Monetary Board has two remaining meetings this year scheduled in October and December. — Katherine K. Chan
