YIELDS on the Bangko Sentral ng Pilipinas’ (BSP) term deposits declined on Thursday as the offer went undersubscribed, with the market continuing to price in the central bank’s third straight rate cut.
Demand for the central bank’s term deposit facility (TDF) amounted to P99.156 billion on Thursday, well below the P240-billion offering. This was lower than the P248.991 billion in bids for a P310-billion offer last week.
Broken down, tenders for the seven-day papers reached just P59.27 billion on Thursday, below the P150 billion on the auction block. This was also lower than the P201.815 billion in bids for the P180-billion offering of eight-day term deposits the previous week.
Banks asked for yields ranging from 5.725% to 6.05%, a wider band compared to the 5.95% to 6.0199% seen a week ago. With this, the average rate of the one-week deposits dropped by 12.31 basis points (bps) to 5.8845% from 6.0076% previously.
Meanwhile, the 13-day papers fetched bids amounting to P39.886 billion, lower than the P90-billion offer and the P47.176 billion in tenders for the P130 billion in 15-day deposits auctioned off last week.
Accepted rates for the tenor were from 5.755% to 6.2%, wider than the 5.96% to 6.074% range seen last week. This caused the average rate of the two-week papers to decline by 10.84 bps to 5.9229% from 6.0313% in the prior auction.
The TDF tenors were adjusted in view of the holidays.
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 the BSP bills are used by the central bank to mop up excess liquidity in the financial system and to better guide market rates.
“The BSP TDF average auction yields again mostly slightly declined for the 14th straight week after the latest local policy rate cut last Thursday,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
The Monetary Board last week delivered a third straight rate cut at its last review for the year, reducing benchmark borrowing costs by 25 bps to bring its policy rate to 5.75%. The central bank has now slashed rates by a total of 75 bps since it began its easing cycle in August.
Mr. Ricafort also noted the BSP chief’s signals of another rate cut in the Monetary Board’s first rate-setting meeting in 2025.
BSP Governor Eli M. Remolona, Jr. told Bloomberg last week that the central bank is open to delivering another rate cut at their first review next year.
Mr. Remolona said the BSP remains in an easing cycle and is “neither more dovish nor less dovish.”
The BSP chief also said after last week’s policy meeting that delivering 100 bps worth of cuts next year may be “too much.”
The central bank will likely keep reducing rates in “baby steps” as an “insurance against a possible increase in inflation,” Mr. Remolona added. — Luisa Maria Jacinta C. Jocson
