The Bangko Sentral ng Pilipinas sees yields on its one-week term deposits edge higher as banks submit fewer bids at the latest auction. The undersubscribed sale points to softer short-term appetite even as the central bank continues using its liquidity tools to steer market rates toward its 4.75% policy benchmark.
Highlights
- BSP's seven-day term deposit facility auction attracts P95.493 billion in bids, falling short of the P120 billion offer and previous P114.324 billion tendered.
- Bid-to-cover ratio drops to 0.7958 from 0.9527 week-on-week, while accepted yields rise with the weighted average up 1.01 basis points to 5.0066%.
- BSP's liquidity operations have absorbed P975.4 billion in excess liquidity as of mid-August, with term deposit rates fully reflecting April and June rate hikes.
Latest auction shows softer appetite
As reported by BusinessWorld Online, the BSP’s seven-day term deposit facility on Wednesday draws P95.493 billion in bids, below the P120 billion on offer and lower than the P114.324 billion tendered in the previous auction for the same volume.This leaves the auction with a bid-to-cover ratio of 0.7958 times, down from 0.9527 times a week earlier. The central bank awards P95.408 billion as accepted rates continue to move higher.
Accepted yields range from 4.96% to 5.035%, compared with 4.95% to 5.03% in the prior auction. The weighted average accepted rate rises by 1.01 basis points to 5.0066% from 4.9965%.
Liquidity operations and policy transmission
The BSP uses the term deposit facility and its own bills to mop up excess liquidity in the financial system and better guide market yields toward its policy rate. It has limited TDF offerings to a single tenor as it rationalizes liquidity operations and focuses on maturities that support monetary policy transmission.As of mid-August, the central bank’s market operations have absorbed P975.4 billion in excess liquidity, with 12.3% siphoned off through the term deposit facility. The BSP also says rates on its seven-day term deposits now fully reflect the two 25-basis-point increases delivered in April and June, which raise the benchmark rate to 4.75%.
In our earlier article on the Philippine Stock Exchange index sliding into the 5,600 range, we covered how a BSP warning that September inflation could climb as high as 7.4% weighed on risk appetite and pushed the benchmark to its weakest close since November 2025. We also noted broad sector declines alongside heavy foreign selling, as investors weighed the inflation outlook and its potential implications for monetary policy.
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