Yields on BSP’s term deposits drop further after latest rate cut

THE BANGKO SENTRAL ng Pilipinas’ (BSP) one-week term deposits continued to fetch lower yields on Wednesday as it cut benchmark interest rates further amid economic growth concerns.

Total bids for the central bank’s term deposit facility (TDF) amounted to P117.878 billion, exceeding the P90 billion auctioned off. However, this was below the P124.877 billion in tenders for the same offer volume last week.

This caused the bid-to-cover ratio to decline to 1.3098 times from the 1.3875 ratio seen the previous week.

Still, the central bank made a full award of its P90-billion offering.

Accepted rates were at 4% to 4.3%, lower and narrower than the 4.45% to 4.495% margin logged a week earlier. This brought the weighted average yield of the seven-day deposits to 4.2404%, dropping by 23.9 basis points (bps) from the 4.4794% in the previous auction.

“[The] weighted average interest rate for the seven-day TDF fell… following the BSP’s policy rate cut announcement on Feb. 19,” the central bank said in a statement.

“The BSP TDF average auction yield continued to ease after the widely expected 25-bp BSP rate cut,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort likewise said in a Viber message.

Last week, at its first policy review for the year, the central bank trimmed borrowing costs by 25 bps for a sixth consecutive time, bringing the policy rate to an over three-year low of 4.25%.

The Monetary Board has now cut rates by 225 bps since its current easing round began in August 2024.

BSP Governor Eli M. Remolona, Jr. said their policy path ahead is now less certain, adding that further reductions may not be enough to boost economic growth, even as they still have policy space as inflation remains subdued. He also said that they are already seeing “tentative” signs of recovery in confidence, which could lift domestic demand.

Philippine gross domestic product growth slowed to a post-pandemic low of 4.4% in 2025 as a graft scandal tied to flood-mitigation projects affected government spending, consumption and investor and consumer sentiment.

Mr. Ricafort also attributed the lower TDF yields to the peso’s recent rise against the dollar, as this would lead to lower import costs that could ease price pressures, which would support the case for further monetary easing.

On Wednesday, the peso jumped by 24.5 centavos to close at a new five-month high of P57.51 against the dollar as fresh uncertainty over the Trump’s administration’s trade policies weighed on the greenback.

The Trump administration is working to increase the rate on US President Donald J. Trump’s new, temporary global tariff to 15% from the 10% rate published by the US Customs and Border Protection agency, a White House official said on Tuesday, Reuters reported.

The temporary tariff imposed under Section 122 of the Trade Act of 1974 are meant to replace Mr. Trump’s global emergency tariffs struck down by the US Supreme Court on Friday.

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. 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 limited 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 as of mid-November 2025, with 5.4% of this being siphoned off via the term deposit facility. — Katherine K. Chan