THE TERM DEPOSITS offered by the Bangko Sentral ng Pilipinas (BSP) fetched a lower average rate on Wednesday as the offer was met with strong demand, with weak third-quarter gross domestic product (GDP) growth fueling bets of further policy easing.
The seven-day tenor of the central bank’s term deposit facility (TDF) attracted bids amounting to P158.208 billion, nearly double the P80 billion placed on the auction block and also higher than the P96.642 billion in tenders for the same offer volume last week. The BSP made a full award of the offering.
Accepted yields were from 4.6% to 4.765%, narrowing from the 4.5% to 4.8% band recorded a week ago. With this, the average rate of the one-week deposits declined by 2.01 basis points (bps) to 4.7559% from 4.776%.
The central bank said the weighted average accepted yield for the seven-day tenor declined further as the auction saw “good demand.”
The BSP did not offer the 14-day tenor for a second week in a row. Meanwhile, the central bank has not auctioned off 28-day term deposits since October 2020 to give way to its weekly offerings of securities with the same ten-or.
However, it did not offer any BSP securities last week. It last sold one-month bills on Nov. 3, auctioning off a bigger volume as it did not offer the 56-day tenor. The last time it put both 28-day and 56-day BSP bills up for sale was on Oct. 24.
The TDF and BSP bills are used by the central bank to mop up excess liquidity in the financial system and better guide market rates towards the policy rate.
The seven-day term deposits fetched a lower average yield on bets that the BSP would ease its policy stance further amid slower third-quarter Philippine GDP growth and manageable inflation, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
Philippine GDP growth slowed to a more than four-year low of 4% in the third quarter, the government reported on Friday. Officials attributed the weakness to slower public spending amid a corruption scandal involving state infrastructure projects, which also hit consumer and investor confidence.
In the first nine months, growth averaged 5%, missing the government’s 5.5%-6.5% full-year target.
Meanwhile, headline inflation was at 1.7% in October, unchanged from September’s print but easing from 2.3% a year ago. In the first 10 months, the consumer price index averaged 1.7%, matching the central bank’s full-year forecast and still below its 2-4% annual target.
Last month, the BSP lowered benchmark interest rates by 25 bps for fourth straight meeting to bring the policy rate to 4.75%. It has now trimmed borrowing costs by 175 bps since its easing cycle began in August 2024.
BSP Governor Eli M. Remolona, Jr. has left the door open to further cuts until next year as they want to help provide stimulus amid softer economic prospects due to the graft scandal.
The Monetary Board will hold its last policy meeting for this year on Dec. 11. — Katherine K. Chan