Term deposit yields inch down on BSP cut bets

YIELDS on the Bangko Sentral ng Pilipinas’ (BSP) seven-day term deposits edged down on Wednesday amid strong demand as still benign inflation and slow growth fueled easing hopes.

Total tenders for the term deposit facility (TDF) reached P132.961 billion, above the P110-billion offer and the P121.841 billion in bids for the same offer volume last week.

The bid-to-cover ratio stood at 1.2087 times, higher than the 1.1076 ratio recorded in the previous auction.

The central bank fully awarded its P110-billion offering.

Accepted yields for the one-week tenor ranged from 4.45% to 4.505%, narrowing from the 4.45% to 4.5185% logged the prior week. With this, the average accepted rate inched down by 0.44 basis point (bp) to 4.4923% from 4.4967% a week ago.

TDF yields continued to go down on Wednesday as the market anticipates another rate cut from the BSP next week following a benign January inflation print and the weak economic growth posted last year, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said via Viber.

BSP Governor Eli M. Remolona, Jr. earlier said a cut is possible at their policy meeting on Feb. 19 if they see the need to support domestic demand.

On Wednesday, Mr. Remolona said inflation returning within the target range and expectations of economic recovery amid the return of confidence may have narrowed their easing space.

Philippine gross domestic product growth slowed to a five-year low of 4.4% last year, missing the government’s 5.5%-6.5% target due to the economic fallout from a corruption scandal that stalled both public and private spending.

However, the central bank last week reiterated that it was nearing the end of its current easing cycle, with further cuts to be limited and data-dependent, even as the inflation outlook remains benign.

The Monetary Board has lowered benchmark rates by 200 bps since August 2024, bringing the policy rate to 4.5%.

Headline inflation accelerated to 2% in January from 1.8% in December but slowed from the 2.9% in the same month last year. This was the fastest in 11 months or since 2.1% in February 2025, which was also the last time the consumer price index was within the BSP’s 2%-4% annual target.

Analysts have said that the BSP may have room to ease its policy stance further to help stimulate economic activity as inflation remains low despite the January uptick.

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 from the market as of mid-November 2025, with 5.4% of this being siphoned off via the term deposit facility. — Katherine K. Chan