YIELDS on the term deposit facility (TDF) ended mixed on Wednesday after the central bank’s surprise decision to keep interest rates steady last week and as the two-week tenor was undersubscribed.
The Bangko Sentral ng Pilipinas’ (BSP) term deposits fetched bids amounting to P203.552 billion on Wednesday, below the P220 billion on the auction block and the P241.191 billion in tenders for the same offer volume a week ago. The central bank awarded P185.038 billion in papers.
Broken down, tenders for the one-week papers reached P119.864 billion, above the P110 billion auctioned off by the central bank and the P111.375 billion in bids for the P120-billion offering seen the previous week. The BSP made a full P110-billion award of the seven-day deposits.
Accepted bid yields ranged from 5.745% to 5.78%, a tad narrower than the 5.74% to 5.785% band seen a week ago. This caused the average rate of the one-week deposits to inch down by 0.16 basis point (bp) to 5.7592% from 5.7608% a week earlier.
Meanwhile, bids for the 14-day term deposits amounted to P83.688 billion, lower than the P110-billion offering and the P129.816 billion in tenders for the P110 billion in papers placed on the auction block a week ago. The BSP awarded just P75.038-billion worth of two-week papers.
Accepted rates for the tenor were from 5.765% to 5.815%, higher than the 5.74% to 5.81% margin seen a week ago. With this, the average rate for the two-week deposits edged up by 0.62 bp to 5.7867% from 5.7805% logged in the prior auction.
The BSP 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.
TDF yields were mixed following the BSP’s surprise decision to leave benchmark interest rates unchanged at its meeting last week, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
The Monetary Board last week unexpectedly held its key interest rates steady in a “prudent” move as global uncertainties cloud the outlook for growth and inflation.
At its first meeting for 2025, the BSP’s policy-setting body left the target reverse repurchase rate unchanged at 5.75%. Rates on the overnight deposit and lending facilities were also kept at 5.25% and 6.25%, respectively.
This was the central bank’s first pause following three consecutive 25-bp cuts since it began its easing cycle in August 2024.
Hints of more reserve requirement ratio (RRR) cuts also affected TDF yield movements, Mr. Ricafort added.
“This could infuse an additional peso liquidity of about P330 billion into the local banking system that could be used by banks to increase loans, investments in bonds, among other assets,” he said.
Mr. Remolona last week said that RRR cuts are still in the pipeline for this year, with the central bank looking to lower big banks’ reserve requirements to 5% from the current 7%.
He said this could be delivered sometime before the Monetary Board’s next policy review on April 3. — Luisa Maria Jacinta C. Jocson