Yields on term deposits drop before BSP review

THE BANGKO SENTRAL ng Pilipinas’ (BSP) one-week term deposits fetched lower yields on Wednesday as the offer attracted strong demand on expectations of another rate cut this week.

Total bids for the seven-day term deposit facility (TDF) stood at P124.877 billion, exceeding the P90 billion auctioned off by the BSP but below the P132.961 billion in tenders for the P110 billion offered a week ago.

This translated to a bid-to-cover ratio of 1.3875 times, higher than the 1.2087 ratio recorded last week.

As a result, the BSP made a full P90-billion award of its TDF offering.

Accepted rates were from 4.45% to 4.495%, a tad narrower than the 4.45% to 4.505% band seen during the previous auction. This caused the weighted average accepted yield of the one-week deposits to go down by 1.29 basis points (bps) week on week to 4.4794% from 4.4923%.

“The BSP TDF average auction yield continued to slightly ease a day before the widely expected 25-bp rate cut at the next BSP rate-setting meeting on Feb. 19,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

He said the peso’s recent rebound against the US dollar could help bring down import costs, which could keep inflation in check to support further monetary easing by the central bank.

All 16 analysts in a BusinessWorld poll said they expect the Monetary Board to deliver a sixth straight 25-bp reduction at its first meeting for the year on Thursday to bring the policy rate to 4.25% amid weak economic growth and still benign inflation.

The BSP has lowered benchmark borrowing costs by a total of 200 bps since it kicked off its current easing round in August 2024.

BSP Governor Eli M. Remolona, Jr. earlier said another cut is possible at this week’s review but also reiterated that their rate cut cycle is nearing its end as they expect the economy to rebound this year and with inflation back within its annual goal after months of below-target prints.

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.

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.

Mr. Ricafort added that demand stayed strong as a P232.8-billion seven-year bond maturity on Feb. 14 freed up liquidity that players would likely reinvest in instruments for returns.

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 earlier said that the central bank has reduced its issuance of short-term papers to enhance monetary policy transmission and encourage 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