BSP’s 7-day term deposit yields rise
YIELDS on the Bangko Sentral ng Pilipinas’ (BSP) seven-day term deposits nudged higher on Wednesday, even as demand exceeded the central bank’s offer amid expectations of potential policy tightening next month.
Total bids for the one-week term deposit facility (TDF) reached P103.2 billion, above the BSP’s P80-billion offer and last week’s P101.7-billion tender. The bid-to-cover ratio climbed to 1.29 from 1.27. The central bank awarded the full P80 billion.
Accepted yields ranged from 4% to 4.25%, lifting the weighted average rate by 0.34 basis point to 4.2331%.
“The modest week-on-week increase in TDF yields reflects excess peso liquidity in the system,” Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said via Viber.
Liquidity in the Philippine financial system hit its fastest pace in five years, growing 8.6% to P19.711 trillion in January.
Yields were also influenced by soaring global and local oil prices, which investors expect could trigger higher inflation and increase the likelihood of an interest rate hike.
“Rising petroleum prices could lift transport fares, wages and other costs, feeding higher inflation expectations,” Mr. Ricafort said. This could prompt the BSP to tighten policy to preserve price stability, he added.
The Monetary Board has eased borrowing costs by 225 bps since August 2024 to 4.25%, the lowest in more than three years.
BSP Governor Eli M. Remolona, Jr. said a $100-a-barrel oil price could push inflation above the 4% ceiling, possibly triggering a rate hike.
Finance Secretary Frederick D. Go also flagged the April 23 Monetary Board meeting as a potential window for adjustment if energy prices remain high.
TDFs and BSP bills help absorb excess liquidity and guide market rates toward the policy benchmark.
The central bank has not offered 28-day term deposits for over five years, favoring weekly auctions of securities instead.
Deputy Governor Zeno Ronald R. Abenoja said the BSP scaled back short-term debt issuance to improve monetary policy transmission and encourage banks to manage liquidity more actively.
Market operations had absorbed P1.5 trillion in liquidity as of mid-November 2025, with 5.4% siphoned off via TDFs, according to the BSP’s latest monetary policy report. — Katherine K. Chan
