Term deposit rates ease further

MANILA, Philippines — Term deposits continued to fetch lower rates as banks expect the Bangko Sentral ng Pilipinas (BSP) to reverse its tightening cycle that saw interest rates rise by 175 basis points last year.

The yield of the six-day term deposits eased for the fifth straight week declining by 3.69 basis points to 4.7198 percent from last week’s 4.7567 percent.

Likewise, the 14-day tenor fetched a lower rate of 4.7524 percent or 2.65 percent lower than the 4.7789 percent.

The term deposit auction facility (TDF) was oversubscribed as bids reached P29.64 billion versus the issue size of P20 billion.

The BSP auction committee is slowly increasing the volume of the TDF with the normalization of the amount of money circulating in the economy. It resumed offering the 14-day tenor, but has yet to resume the sale of 28-day term deposits.

Bids for the six-day tenor reached P14.12 billion for the P10 billion offering, while tenders for the 14-day term deposits reached P15.52 billion versus the issue size of P10 billion.

Liquidity is beginning to return to the financial system after temporary tightness due to higher demand for cash on account of the Holy Week, tax season and the coming May election.

BSP Governor Benjamin Diokno had said the reversal of the tightening cycle last year and the reduction of the level of deposits banks are required to keep with the central bank are “inevitable.”

“As things normalize, naturally, we should move toward normalization. Those two things are inevitable, reduction of the rates and reduction of the reserve requirement. They will come, it is just a matter of timing,” Diokno said during the general membership meeting of the Financial Executives of the Philippines (FINEX) last Monday.

The next rate-setting meeting of the BSP’s Monetary Board is scheduled on May 9.