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THE BANGKO SENTRAL ng Pilipinas’ (BSP) term deposits fetched higher a higher average yield on Wednesday despite stronger demand, after its latest policy rate hike and with the market pricing in further tightening. Tenders for the seven-day term deposit facility (TDF) reached P140.675 billion, exceeding the P120 billion auctioned off and the P105.
THE BANGKO SENTRAL ng Pilipinas’ term deposits fetched higher a higher average yield on Wednesday despite stronger demand, after its latest policy rate hike and with the market pricing in further tightening.
Tenders for the seven-day term deposit facility reached P140.675 billion, exceeding the P120 billion auctioned off and the P105.824 billion in bids for the same offer volume in the prior week. This translated to a higher bid-to-cover ratio of 1.1723 times from the 0.8819 ratio in the previous auction. Accepted yields for the one-week papers were at the 4.725% to 5.01% range, wider and higher than the 4.7225% to 4.77% band last week.
With this, the weighted average accepted rate of the term deposits jumped by 19.59 basis points week on week to 4.9494% from 4.7535%.
“At the auction held on Sept. 2, 2026, the weighted average interest rate for the 7-day TDF rose… following the BSP’s policy rate hike announcement on Aug. 27,” the central bank said in a statement. Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort likewise said the higher TDF yield came as the market reacted to the BSP’s latest policy tightening move and hawkish forward guidance as it seeks to bring down red-hot inflation.
Last week, the Monetary Board hiked rates by 25 bps for a third straight meeting in a preemptive move to contain inflation risks from the looming severe El Niño, wage hike, and volatile global oil prices, bringing the key rate to 5%. The Monetary Board has now raised benchmark borrowing costs by a cumulative 75 bps since it began tightening in April.
BSP Governor Eli M. Remolona, Jr. said they hope they won’t have to hike more, but left the door open to further increases as needed to bring inflation closer to their 3% target. Headline inflation averaged 5% as of July. The central bank sees the consumer price index averaging 6.1% this year.poll of 20 analysts yielded a median estimate of 6% for the August inflation print, slower than July’s 6.2% but sharply faster than the 1.5% clip a year ago.
Mr. Ricafort said the re-escalation of the Middle East conflict also adds to inflation risks. The Federal Reserve’s recent hawkish signals, which fueled anticipation for its first hike this year, may have also nudged TDF rates higher, he added.
“uture Fed rate hikes could be matched by the BSP to better manage interest rate differentials,” he said. The Fed in July held its benchmark rates steady at the 3.5%-3.75% range for the fifth straight meeting. At the Jackson Hole Symposium held last week, Fed Chair Kevin Warsh said the Fed could take action to tackle sticky inflation, with the headline clip still above their 2% target.
The central bank uses the TDF and BSP bills to mop up excess liquidity in the financial system and better guide market yields towards its policy rate. It has limited its TDF offerings to a single tenor to rationalize its liquidity operations and focus on tenors that would boost monetary policy transmission.
As of early June, the BSP’s market operations have absorbed P1.3 trillion in excess liquidity from the market, with 6.9% of this being siphoned off via the term deposit facility. —
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