TERM DEPOSIT yields fell on Wednesday amid signals of further rate cuts by the Bangko Sentral ng Pilipinas (BSP), albeit smaller and fewer than initially expected.
The central bank’s term deposit facility (TDF) fetched bids amounting to P274.557 billion on Wednesday, higher than the P230-billion offering and P150.399 billion in tenders for the P240 billion auctioned off a week ago.
Broken down, tenders for the seven-day papers reached P144.992 billion, above the P120 billion auctioned off by the central bank and the P131.646 billion in bids for the same volume offered the previous week.
Banks asked for yields ranging from 5.75% to 5.789%, slightly narrower than the 5.75-5.8% band seen a week earlier. This caused the average rate of the one-week deposits to inch down by 0.47 basis point (bp) to 5.7754% from 5.7801% previously.
Meanwhile, bids for the 14-day term deposits amounted to P129.565 billion, higher than the P110-billion offering and the P118.753 billion in tenders for the P120-billion offer auctioned off a week earlier.
Accepted rates for the tenor were from 5.79% to 5.835%, slimmer than the 5.79% to 5.87% margin seen a week ago. With this, the average rate for the two-week deposits declined by 1.31 bps to 5.8143% from 5.8274% logged in the prior auction.
The central bank has not auctioned off 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 central bank bills are used by the BSP to mop up excess liquidity in the financial system and to better guide market rates.
Term deposit yields were slightly lower after “dovish” signals from the BSP chief and bets of another rate cut as early as next week after full-year 2024 Philippine gross domestic product (GDP) growth missed the government’s target, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
BSP Governor Eli M. Remolona, Jr. last week said that a rate cut is “on the table” at the Monetary Board’s Feb. 13 policy meeting, with economic growth “a little bit below capacity.”
He said a negative output gap could prompt further monetary easing, especially if the gap widens.
Philippine GDP grew by 5.6% in 2024, falling short of the government’s 6-6.5% target.
He added that the BSP may slash benchmark interest rates by a cumulative 50 bps this year in a gradual manner as “policy insurance” against risks, saying that 75 bps or 100 bps in cuts may be “too much.”
Mr. Remolona said the reductions could be delivered in increments of 25 bps each in the first and second half of the year.
The Monetary Board has cut benchmark borrowing costs by 75 bps since kicking off its easing cycle in August last year, bringing the policy rate to 5.75%.
Benign inflation could also justify further monetary easing by the BSP, Mr. Ricafort added.
The consumer price index rose 2.9% year on year in January, steady from December but up from 2.8% in the same month in 2024, the Philippine Statistics Authority reported on Wednesday.
This was within the BSP’s 2.5%-3.3% forecast for the month but was a tad higher than the 2.8% median estimate in a BusinessWorld poll of 16 analysts. — Luisa Maria Jacinta C. Jocson
