TERM DEPOSIT yields inched lower on Thursday on expectations of further rate cuts by the Bangko Sentral ng Pilipinas (BSP) following slower-than-expected Philippine gross domestic product (GDP) growth in 2024.
The central bank’s term deposit facility (TDF) fetched bids amounting to P250.399 billion on Thursday, higher than the P240-billion offering but below the P276.657 billion in tenders for the P280 billion auctioned off a week ago.
Broken down, tenders for the six-day papers reached P131.646 billion, above the P120 billion auctioned off by the central bank but a tad lower the P132.385 billion in bids for the P160 billion in eight-day deposits placed on the auction block a week prior.
Banks asked for yields ranging from 5.75% to 5.8%, narrower than the 5.735% to 5.825% band seen a week earlier. This caused the average rate of the one-week deposits to decline by 0.92 basis point (bp) to 5.7801% from 5.7893% previously.
Meanwhile, bids for the 13-day term deposits amounted to P118.753 billion, short of the P120-billion offering and the P144.272 billion in tenders for the P120-billion offer in the previous week. The BSP accepted all submitted bids.
Accepted rates for the tenor were from 5.79% to 5.87%, slightly wider and higher than the 5.7888% to 5.8675% margin seen a week ago. With this, the average rate for the two-week deposits dropped by 0.73 bp to 5.8274% from 5.8347% logged in the prior auction.
The TDF tenors were adjusted from the usual seven- and 14-day maturities in view of the Lunar New Year holiday.
The central bank has not auctioned 28-day term deposits for more than four years to give way to its weekly offerings of securities with the same tenor.
The term deposits and BSP bills are used by the central bank to mop up excess liquidity in the financial system and to better guide market rates.
Term deposit yields went down on expectations that the BSP would cut benchmark interest rates next month after softer-than-expected Philippine GDP data, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
The Philippine economy grew by 5.2% in the fourth quarter of 2024, matching the third-quarter print but slower than the 5.5% expansion logged in the same period in 2023, the government reported on Thursday.
This brought full-year 2024 GDP growth to 5.6%, below the government’s 6-6.5% growth target. This was also a tad slower than the 5.7% median estimate yielded in a BusinessWorld poll of 18 economists and analysts.
This marked the second straight year that Philippine GDP growth missed the government’s goal.
The BSP’s policy-setting Monetary Board will hold its first review for the year on Feb. 13.
BSP Governor Eli M. Remolona, Jr. earlier said the central bank still has room to continue its rate-cut cycle as current benchmark interest rates remain “restrictive.”
The Monetary Board has slashed benchmark borrowing costs by a total of 75 bps since it began its easing cycle in August, bringing its policy rate to 5.75%.
Mr. Ricafort added that TDF yields dropped amid the recent decline in global crude oil prices.
Oil prices were little changed on Thursday as markets braced for threatened tariffs by US President Donald J. Trump on Mexico and Canada, the two largest suppliers of crude oil to United States, and awaited a meeting of OPEC+ producers, Reuters reported.
Brent crude futures were down 7 cents or 0.1% at $76.51 a barrel by 0411 GMT. US crude futures were little changed at 2 cents up or 0.03% to $72.64. US crude futures had settled at their lowest price this year on Wednesday.
Mr. Trump still plans to make good on his promise to impose tariffs on Canada and Mexico on Saturday, White House spokeswoman Karoline Leavitt told reporters on Tuesday.
Mr. Trump’s nominee to run the Commerce department, Howard Lutnick, said on Wednesday that Canada and Mexico can avoid the tariffs if they act swiftly to close their borders to fentanyl, while vowing to slow China’s advancement in artificial intelligence.
The recent correction in US Treasury yields also affected TDF rates, Mr. Ricafort said. — Luisa Maria Jacinta C. Jocson with Reuters
