YIELDS on the Bangko Sentral ng Pilipinas’ (BSP) term deposits went down on Wednesday following slower-than-expected inflation in February, which could open the door for further monetary policy easing.
The BSP’s term deposit facility (TDF) attracted bids amounting to P250.471 billion on Wednesday, above the P190 billion on the auction block as well as the P194.816 billion seen a week ago for the same volume offer. The cen-tral bank made a full P190-billion award of the papers.
Broken down, tenders for the seven-day papers reached P115.922 billion, higher than the P100 billion auctioned off by the central bank and the P110.14 billion in bids for the same offer volume seen the previous week. The BSP accepted P100 billion in bids as planned.
Accepted yields ranged from 5.74% to 5.77%, narrower and slightly lower than the 5.5% to 5.775% band seen a week ago. This caused the average rate of the one-week deposits to inch down by 0.14 basis point (bp) to 5.754% from 5.7554% previously.
Meanwhile, bids for the 14-day term deposits amounted to P134.549 billion, above the P90-billion offering and the P84.676 billion in tenders for the same offer a week ago. The central bank made a full P90-billion award of the tenor.
Accepted rates were from 5.76% to 5.79%, narrowing from the 5.7% to 5.815% margin recorded a week ago. With this, the average rate for the two-week deposits inched down by 0.53 bp to 5.7752% from the 5.7805% logged in the prior auction.
The central bank has not auctioned off 28-day term deposits for more than four years to give way to its weekly offerings of securities with the same tenor.
The term deposits and the BSP bills are used by the central bank to mop up excess liquidity in the financial system and to better guide market rates.
TDF yields went down on Wednesday after the release of the latest headline inflation data, which showed that the average rise in prices of consumer goods eased more than expected last month, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.
“More benign inflation data could support a BSP rate cut as early as the next rate-setting meeting on April 3,” Mr. Ricafort said.
Headline inflation sharply slowed to 2.1% in February from 2.9% in January and 3.4% a year ago, the Philippine Statistics Authority reported on Wednesday.
This was the slowest monthly print in five months or since the 1.9% in September 2024. The February print was also well below the 2.6% median estimate in a BusinessWorld poll of 18 analysts conducted last week.
Despite surprising markets with a policy pause last month, BSP Governor Eli M. Remolona, Jr. has said the central bank is still in easing mode, signaling the possibility of up to 50 bps worth of cuts this year.
Mr. Ricafort added that the peso’s recent strength against the dollar also led to lower TDF yields as this could support further easing in inflation, which would give the central bank more room to cut borrowing costs.
The peso has closed at the P57 level since late February after trading at the P58 range earlier this year as the dollar hit multi-month lows due to concerns over the US economy’s health. — Luisa Maria Jacinta C. Jocson