Term deposit rates slip on BSP rate cut hopes

YIELDS on the term deposits auctioned off by the Bangko Sentral ng Pilipinas (BSP) dropped on Wednesday amid rate cut signals from the Finance chief.

Demand for the central bank’s term deposit facility (TDF) reached P253.468 billion on Wednesday, below the P250 billion on the auction block as well as the P275.772 billion in bids last week for a P310-billion offer.

Broken down, tenders for the one-week term deposits hit P141.985 billion, below the P150-billion offer and the P164.612 billion in bids seen last week for P170 billion on the auction block.

Banks asked for yields ranging from 6.5% to 6.57%, a wider band than the 6.52% to 6.57% seen at the March 20 auction. This brought the average rate of the seven-day debt to 6.5422%, down by 1.65 basis points (bp) from 6.5587% previously.

Meanwhile, the 14-day deposits attracted P111.483 billion in bids, higher than the P100 billion on offer and the P111.16 billion in tenders seen the previous week for a P140-billion offering.

Accepted rates for the two-week debt were from 6.57% to 6.605%, lower than the 6.58% to 6.61% margin seen last week. With this, the average rate of the 14-day deposits slipped by 0.11 bp to 6.5903% from 6.5914% a week ago.

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

The TDF and 28-day BSP bills are used by the central bank to mop up excess liquidity in the financial system and to better guide market rates.

Term deposit yields went down amid rate cut signals from the BSP chief, Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said in a Viber message.

BSP Governor Eli M. Remolona, Jr. last week said the Monetary Board may begin cutting rates later this year.

The Monetary Board will next meet to discuss policy on April 8.

The BSP has kept its policy rate steady at a near 17-year high of 6.5% for three straight meetings after it hiked borrowing costs by 450 bps from May 2022 to October 2023 to help bring down elevated inflation. — L.M.J.C. Jocson