Term deposit rates drop sharply

MANILA, Philippines — Term deposits rates fell sharply yesterday, dropping below four percent across the board as the Bangko Sentral ng Pilipinas (BSP) is expected to further slash key interest rates.

The seven-day term deposits fetched 3.8943 percent at the term deposit auction facility (TDF), 12.97 basis points lower than last week’s 4.0240 percent.

Likewise, the yield of the 14-day term deposits declined by 14.25 basis points to 3.8772 percent from 4.0197 percent, while the 28-day term deposit rates dropped by 13.65 basis points to 3.9054 percent from 4.0419 percent.

The last time term deposit rates were below four percent was in August 2018.

BSP Deputy Governor Francisco Dakila Jr. said term deposit rates fell across the board yesterday after the Monetary Board resumed its easing cycle, slashing interest rates by 25 basis points last Feb. 6 as a preemptive move to support market confidence and to provide additional policy support to ward off the potential spillovers associated with increased external headwinds including the outbreak of the 2019 novel coronavirus.

The central bank has slashed interest rates by 100 basis points since May last year amid the benign inflation environment as well as slower than expected gross domestic product (GDP) growth.

“Average interest rates fell due primarily to the 25-basis points reduction in the reverse repurchase rate last February 6,” he said.

Tenders reached P170.02 billion, slightly higher than the P170 billion offering, as the seven-day tenor was undersubscribed.

Bids for the seven-day term deposits only amounted to P49.66 billion, way below the P60 billion offering.

“There was a slight undersubscription in the seven-day TDF following the settlement of the national government’s retail treasury bonds on February 11,” he added.

Both the 14- and 28-day term deposits were oversubscribed. Tenders for the 14-day tenor amounted to P63.54 billion versus the offer size of P60 billion, while bids for the 28-day reached P56.92 billion exceeding the reduced volume of P50 billion.