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Term deposit yields slip on BSP’s rate cut hints

Bangko Sentral ng Pilipinas main office in Manila — BW FILE PHOTO

YIELDS on the term deposits slipped on Wednesday as market players expect the Bangko Sentral ng Pilipinas (BSP) to begin its policy easing cycle as early as next month.

The central bank’s term deposit facility (TDF) attracted bids amounting to P268.701 billion on Wednesday, above the P250 billion on the auction block but lower than the P321.657 billion seen a week ago for a P230-billion offer.

Broken down, tenders for the seven-day papers reached P134.407 billion, higher than the P130 billion auctioned off by the central bank but lower than the P159.459 billion in bids recorded the previous week.

Banks asked for yields ranging from 6.495% to 6.53%, marginally wider than the 6.495% to 6.525% band seen a week ago. This caused the average rate of the one-week deposits to inch down by 0.49 basis point (bp) to 6.5105% from 6.5154% the previous week.

Meanwhile, bids for the 14-day term deposits amounted to P134.294 billion, lower than the P120 billion on the auction block and the P162.198 billion in tenders seen for the P110-billion offer on July 3.

Accepted rates were from 6.535% to 6.569%, narrower than the 6.5245% to 6.575% margin recorded a week ago. With this, the average rate for the two-week deposits dropped by 1.35 bps to 6.5546% from 6.5681% logged in the prior auction.

The BSP has not auctioned off 28-day term deposits for more than three years to give way to its weekly offerings of securities with the same tenor.

The term deposits and the 28-day BSP bills are used by the central bank to mop up excess liquidity in the financial system and to better guide market rates.

TDF yields went down on Wednesday amid continued rate cut signals from the BSP, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

“The TDF auction yields were slightly lower week-on-week after local monetary officials recently reiterated a possible local policy rate cut as early as August 2024 and could even come ahead of a possible Fed rate cut,” Mr. Ricafort said in a Viber message.

BSP Governor Eli M. Remolona, Jr. last month said the Monetary Board may deliver its first rate cut in over three years at its Aug. 15 review — the only policy meeting scheduled in the third quarter — as they expect inflation to continue easing this semester.

The Monetary Board could reduce borrowing costs by 25 bps in the third quarter and by another 25 bps in the fourth quarter, he said.

Mr. Ricafort added that TDF yields were affected by “signals on additional National Government foreign bond sales… that could somewhat hedge and help reduce the need for more local borrowings.”

The government is looking to issue Japanese yen-denominated and US dollar-denominated bonds within the year, Finance Secretary Ralph G. Recto said on Monday. It plans to borrow $5 billion this year, of which $2 billion was raised from the issuance of global bonds last May. — Luisa Maria Jacinta C. Jocson

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