YIELDS on the Bangko Sentral ng Pilipinas’ (BSP) term deposits went down on Wednesday as inflation eased for a fifth straight month in June, supporting expectations of an extended pause in rate hikes.

The central bank’s term deposit facility (TDF) attracted bids amounting to P400.915 billion on Wednesday, above the P300 billion on the auction block as well as the P245.255 billion seen a week ago for a P240-billion offer.

Broken down, tenders for the seven-day papers reached P225.499 billion, higher than the P160 billion auctioned off by the central bank and the P134.829 billion in bids for a P140-billion offer seen the previous week.

Banks asked for yields ranging from 6.54% to 6.6%, narrower than the 6.55% to 6.62% band seen a week ago. This caused the average rate of the one-week deposits to inch down by 0.82 basis point (bp) to 6.5765% from 6.5847% previously.

Meanwhile, bids for the 14-day term deposits amounted to P175.416 billion, higher than the P140-billion offering and the P110.426 billion in tenders for a P100-billion offer seen on June 29.

Accepted rates were from 6.55% to 6.6125%, also narrower than the 6.5% to 6.6188% margin recorded a week ago. With this, the average rate for the two-week deposits declined by 1.07 bps to 6.5854% from the 6.5961% logged in the prior auction.

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

The term deposits and the 28-day 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 after inflation eased to its lowest in 14 months in June, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

The consumer price index (CPI) slowed to 5.4% in June from 6.1% in May 2023 and June 2022.

This was a tad lower than the 5.5% median estimate in a BusinessWorld poll conducted last week and near the low end of the central bank’s 5.3-6.1% forecast for the month.

It was also the first time that inflation fell below the 6% level since the 5.4% print in May 2022.

June inflation was the slowest in 14 months or since the 4.9% clip in April last year. Still, it marked the 15th straight month that the CPI exceeded the BSP’s 2-4% target for the year.

For the first six months, inflation averaged at 7.2%, still higher than the central bank’s 5.4% forecast for 2023.

Newly appointed BSP Governor Eli M. Remolona said inflation will return to the 2-4% target range before the year ends.

Former BSP Governor Felipe M. Medalla earlier said the BSP may keep rates on hold until the third quarter and ruled out a rate cut this year due to uncertainty over the future policy moves of the US Federal Reserve.

The Monetary Board extended its tightening pause for a second straight meeting in June, keeping the benchmark rate at a near 16-year high of 6.25%.

Its next policy review is on Aug. 17. — Keisha B. Ta-asan