Term deposit yields drop as offer sees strong bids

YIELDS on the Bangko Sentral ng Pilipinas’ (BSP) term deposits slipped on Wednesday as the offer was met with strong demand after it reduced the offer volume.

The central bank’s seven-day term deposit facility (TDF) attracted a total of P101.747 billion in bids, exceeding the P80-billion offer but below the P106.568 billion in tenders for the P90 billion auctioned off last week.

This was equivalent to a bid-to-cover ratio of 1.2718 times, higher than the 1.1841 ratio during the previous auction.

The BSP fully awarded P80 billion in papers.

Accepted yields ranged from 4% to 4.26%, wider and lower than the 4.05% to 4.28% band seen a week ago. With this, the average accepted rate of the one-week papers edged down by 0.43 basis point (bp) week on week to 4.2297% from 4.234% previously.

“The seven-day BSP TDF average auction yield (was) again marginally lower…, slightly lower than the key local policy rate of 4.25% despite the recent market volatility, as this could reflect excess peso liquidity in the financial system, as manifested by total demand still above P100 billion,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said.

Domestic liquidity grew by 8.6% to P19.711 trillion in January from P18.149 trillion a year ago. This was the fastest growth in nearly five years or since the 9.5% in February 2021.

Mr. Ricafort added that the peso’s recovery after it hit a new all-time low at the start of the week due to the surge in global oil prices to past $100 a barrel amid the Middle East war helped ease inflation concerns.

BSP Governor Eli M. Remolona, Jr. last week said that oil climbing to $100 per barrel could drive inflation above 4%, which could prompt the central bank to end its easing cycle and hike rates for the first time in over two years.

Mr. Remolona said they aim to keep inflation between 2% and 4%, with 3% as their “sweet spot.”

The Monetary Board has lowered borrowing costs by a cumulative 225 bps since it began easing in August 2024, bringing the policy rate to an over three-year low of 4.25%.

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. Meanwhile, 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.

BSP Deputy Governor Zeno Ronald R. Abenoja earlier said that the central bank has reduced its issuance of short-term papers to enhance monetary policy transmission and push banks to better manage their liquidity.

Based on the BSP’s latest monetary policy report, its market operations have absorbed P1.5 trillion in liquidity from the market as of mid-November 2025, with 5.4% of this being siphoned off via the term deposit facility. — Katherine K. Chan