Bangko Sentral ng Pilipinas main office in Manila. — BW FILE PHOTO

YIELDS on the Bangko Sentral ng Pilipinas’ (BSP) term deposits dropped on Wednesday, even as the one-week tenor went undersubscribed, ahead of the anticipated rate cut at the Monetary Board’s meeting on Thursday.

Bids for the central bank’s term deposit facility (TDF) totaled P74.45 billion, below the P80 billion on the auction block but slightly higher than the P71.36 billion in tenders seen last week for a P100-billion offer. The central bank awarded only P68.675 billion in deposits as the one-week paper was undersubscribed.

Broken down, tenders for the seven-day papers were at only P28.675 billion, lower than the P40 billion auctioned off and the P32.985 billion in bids seen last week for a P50-billion offer. The BSP accepted all submitted tenders.

Banks asked for yields ranging from 5.165% to 5.27%, wider than the 5.235% to 5.27% margin a week ago. With this, the average accepted rate for the one-week deposits inched down by 0.82 basis point (bp) to 5.2475% from 5.2557% previously.

Meanwhile, the 14-day deposits attracted P45.775 billion in bids, higher than the P40 billion auctioned off and the P38.375 billion in tenders fetched last week for a P50-billion offer. The central bank fully awarded P40 billion in two-week papers. 

Accepted yields were from 5.24% to 5.2799%, wider and lower than the 5.26% to 5.2899% band seen last week. This caused the average rate of the 14-day papers to decline by 0.79 bp to 5.2675% from 5.2754% previously.

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

Both the TDF and BSP bills are used by the central bank to mop up excess liquidity in the financial system and to better guide market rates towards the policy rate.

“BSP TDF average auction yields were marginally lower a day before the widely expected 25-bp BSP rate cut… on Thursday,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

A BusinessWorld poll conducted last week showed that all 20 analysts expect the Monetary Board to cut the target reverse repurchase rate by 25 bps to 5% at its meeting on Thursday.

If realized, this would be the third straight 25-bp reduction since April. The central bank has so far lowered benchmark borrowing costs by a total of 125 bps since it began its easing cycle in August 2024. — Katherine K. Chan

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