YIELDS on the Bangko Sentral ng Pilipinas’ (BSP) seven-day term deposits fell slightly on Wednesday as investors priced in a possible policy easing at the central bank’s first Monetary Board meeting this year.
Total bids for the one-week term deposit facility (TDF) reached P150.07 billion, surpassing the BSP’s P110-billion offer and last week’s P127.6 billion in tenders. The central bank accepted the full P110 billion. The resulting bid-to-cover ratio rose to 1.36 times from 1.16.
Accepted yields narrowed to 4.44% to 4.5149%, with the weighted average rate easing by 0.89 basis point week on week to 4.501%, almost matching the BSP’s key overnight borrowing rate of 4.5%.
Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said the modest decline reflects dovish signals from the central bank, which could cut rates in February.
The BSP is near the end of its easing cycle, but the strong demand may indicate investors locking in yields ahead of a potential reduction, he said.
The Monetary Board has lowered key borrowing costs by 200 basis points (bps) since August 2024, bringing the benchmark to a more than three-year low of 4.5%.
In 2025, the central bank delivered five straight 25-bp cuts. BSP Governor Eli M. Remolona, Jr. has signaled that a further 25-bp cut is possible but unlikely given current economic data.
Local inflation remained benign at 1.8% in December 2025, below the BSP’s 2%-4% target for the 10th consecutive month. Slower economic growth, partly due to weather-related disruptions and cautious infrastructure spending, also supports continued accommodative policy.
External factors could influence future moves. A possible US Federal Reserve rate cut would allow the BSP to ease further while maintaining interest rate differentials that stabilize the peso.
Recent policy reforms and governance measures, including initiatives on anti-corruption and fiscal accountability, have bolstered investor confidence, contributing to strong demand at the TDF auction.
The TDF and BSP bills serve as tools to absorb excess liquidity and guide market rates toward the policy benchmark.
Investors continue to monitor both domestic economic trends and global central bank actions, weighing their implications for borrowing costs, liquidity management and peso stability in the months ahead. — Katherine K. Chan