Term deposit yield slips as demand wanes
THE BANGKO SENTRAL ng Pilipinas’ (BSP) one-week term deposits fetched a slightly lower average yield on Wednesday even as the offer was undersubscribed, as likely weak fourth-quarter economic growth fueled bets for further monetary policy easing.
The central bank’s seven-day term deposits attracted bids amounting to P106.037 billion, below the P110-billion offer and the P162.768 billion in tenders for the same volume placed on the auction block last week.
This resulted in a bid-to-cover ratio of 0.9640 times, down from the previous 1.4797 ratio. This was the first time since Dec. 23 that the term deposit facility (TDF) offering was undersubscribed.
The BSP only accepted P83.899 billion in bids to keep the average rate low.
Accepted yields ranged from 4.45% to 4.5125%, a tad higher than the 4.44% to 4.5075% logged a week earlier. With this, the weighted average rate of the one-week papers slipped by 0.09 basis point (bp) week on week to 4.4973% from 4.4982%.
Expectations of a rate cut from the BSP next month due to likely soft fourth-quarter and full-year 2025 Philippine gross domestic product (GDP) growth caused term deposit yields to inch lower, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
He said further easing would “help spur local economic growth… alongside expansionary fiscal spending through catch-up government spending, especially on infrastructure.”
Last week, BSP Governor Eli M. Remolona, Jr. said that another cut remains uncertain, adding that while they will consider the latest Philippine GDP data when the Monetary Board meets on Feb. 19, weaker-than-expected growth wouldn’t automatically warrant further easing as inflation remains their primary concern.
The central bank has slashed benchmark borrowing costs by a total of 200 bps since its rate cut cycle began in August 2024, bringing the policy rate to 4.5%.
The government will release fourth-quarter and full-year 2025 GDP data on Thursday, Jan. 29.
The Philippine economy likely expanded by 4.2% in the fourth quarter, based on a BusinessWorld poll of 18 economists and analysts. This would put full-year growth at 4.8%, below the government’s 5.5%-6.5% target.
Meanwhile, Mr. Ricafort said the undersubscription seen on Wednesday was likely due to reduced liquidity in the financial system amid the strong demand seen for the Bureau of the Treasury’s recent auctions of government securities and its $2.75-billion triple-tranche global bond issue that was settled on Tuesday.
The central bank uses the TDF and BSP bills to mop up excess liquidity in the financial system and better guide market rates towards the policy rate.
It last auctioned off both the seven-day and 14-day deposits on Oct. 29. It has not offered 28-day term deposits for over five years to give way to its weekly offerings of securities with the same tenor.
Based on the BSP’s latest monetary policy report, its market operations have absorbed P1.5 trillion in liquidity as of mid-November 2025, with 5.4% of this being siphoned off via the term deposit facility. — Katherine K. Chan
