MANILA, Philippines — Term deposit rates ended mixed yesterday as banks swarmed the liquidity absorption facility, anticipating that the Bangko Sentral ng Pilipinas (BSP) would slash interest rates anew due to tame inflation and slower economic growth.
The yield of the seven-day tenor dropped by 3.83 basis points to 4.6278 percent yesterday from last week’s 4.6661 percent while the yield of the 14-day term deposits went up by 10.59 percent to 4.7107 percent from 4.6562 percent.
The BSP did not auction the 28-day tenor yesterday.
BSP Deputy Governor Diwa Guinigundo said in an interview excess liquidity is slowly finding its way into the financial system with the recent reduction of the reserve requirement ratio (RRR).
Bids amounted to P40.84 billion or double the P20-billion volume.
Tenders for the seven-day tenor reached P20.26 billion or double the issue size of P10 billion, while bids for the 14-day term deposits amounted to P20.58 billion versus the P10-billion volume.
Guinigundo said banks see expect inflation to further ease, leading to lower interest rates.
The BSP’s Monetary Board is scheduled to hold its rate-setting meeting today.
Monetary authorities slashed interest rates by 25 basis points last May 9 amid easing inflation as well as the slower-than-expected gross domestic product (GDP) growth of 5.6 percent in the first quarter of the year from 6.3 percent in the fourth quarter of the year.
Likewise, the BSP lowered the level of deposits banks are required to keep with the central bank as part of the commitment of the late BSP governor Nestor Espenilla Jr. to bring down the level to single digit by 2023.
About P106 billion worth of liquidity was released into the system last May 31 as the 100-basis point reduction in the RRR for big, mid-sized and small banks took effect.