The Bangko Sentral ng Pilipinas (BSP) One-week fixed deposits fetched lower yields on Wednesday as the offer attracted strong demand On expectations of another rate cut this week.
Bids for the seven-day term deposit facility (TDF) totaled P124.877 billion, higher than the P90 billion auctioned by the BSP, but lower than the P132.961 billion in the P110 billion tenders offered a week earlier.
This implies a bid-to-cover ratio of 1.3875 times, which is higher than the 1.2087 ratio recorded last week.
As a result, BSP earned the full P90-billion prize of its TDF offering.
The rates accepted ranged from 4.45% to 4.495%, slightly lower than the 4.45% to 4.505% band seen during the previous auction. Due to this, the weighted average accepted yield on one-week deposits declined by 1.29 basis points (bps) week-on-week from 4.4923% to 4.4794%.
Rizal Commercial Banking Corp. chief economist Michael L. “The BSP TDF average auction yield continued to decline slightly a day ahead of a widely expected 25-bp rate cut at the next BSP rate-setting meeting on February 19,” Ricafort said in a Viber message.
He said the peso's recent rebound against the US dollar could help reduce import costs, which could keep inflation under control to support further monetary easing by the central bank.
All 16 analyzers in one businessworld The survey said they expect the Monetary Board to make a sixth consecutive 25-bp cut at its first meeting for the year on Thursday to bring the policy rate down to 4.25% amid weak economic growth and still benign inflation.
The BSP has reduced benchmark borrowing costs by a total of 200 bps since starting its current easing round in August 2024.
BSP Governor Eli M. Remolona, Jr. had previously said that another cut was possible at this week's review, but he also reiterated that his rate cut cycle is nearing its end as he expects the economy to improve this year and inflation to fall back within its annual target after being below target for several months.
Philippine gross domestic product growth fell to a five-year low of 4.4% last year, missing the government's 5.5%-6.5% target due to the economic fallout from a corruption scandal. Due to which public and private expenditure stopped.
Headline inflation rose to 2% in January from 1.8% in December, but slowed from 2.9% in the same month last year. This was the fastest in 11 months or since 2.1% in February 2025, which was the last time the consumer price index was within the BSP's 2%-4% annual target.
Mr. Ricafort said demand remained strong due to the maturity of P232.8 billion seven-year bonds on Feb. 14, freeing up liquidity that players can reinvest in instruments for returns.
The central bank uses TDF and BSP bills to liquidate excess liquidity in the financial system and better guide market rates towards the policy rate.
It last auctioned both seven-day and 14-day deposits on October 29. It has not offered 28-day fixed deposits for more than five years to give way to its weekly offering of securities with similar tenure.
BSP Deputy Governor Zeno Ronald R. Abenoja earlier said the central bank had reduced short-term paper issuance to enhance monetary policy transmission and encourage banks to better manage their liquidity.
Based on the BSP's latest monetary policy report, its market operations have absorbed P1.5 trillion of liquidity from the market by mid-November 2025, of which 5.4% has been withdrawn through the fixed deposit facility. — Katherine K. chan