Term deposit yields fall after reserve ratio cuts

By Luisa Maria Jacinta C. Jocson, Reporter

TERM DEPOSIT YIELDS fell on Wednesday after the Bangko Sentral ng Pilipinas (BSP) further slashed the reserve requirements for banks and nonbanks.

The BSP’s term deposit facility (TDF) attracted bids worth P194.816 billion, more than the P190 billion on the auction block but lower than the P203.552 billion in bids a week ago for a P220-billion offer.

Tenders for the seven-day debt reached P110.14 billion against the P100 billion auctioned off by the central bank. However, it was below the P119.864 billion in bids for the seven-day deposits offered last week.

Banks asked for yields of 5.5% to 5.775% against 5.745% to 5.78% a week earlier. This caused the average rate of the one-week deposits to slip to 5.7554% from 5.7592%.

Meanwhile, bids for the 14-day term deposits stood at P84.676 billion versus the P90-billion offer and P83.688 billion in tenders a week ago.

Accepted rates were 5.7% to 5.815%, compared with 5.765% to 5.815% a week ago. As a result, the average rate of the two-week deposits fell to 5.7805% from 5.7867% last week.

The BSP has not auctioned off 28-day term deposits for more than three years to give way to its weekly offer of securities with the same tenor.

The central bank uses the term deposits and 28-day bills to mop up excess liquidity in the financial system and guide market rates.

“The TDF average auction yields were slightly lower after the latest RRR cut that would infuse about P330 billion into the local banking system,” Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said in a Viber message.

The central bank on Friday said it would cut the reserve requirement ratio (RRR) of universal and commercial banks and nonbank financial institutions with quasi-banking functions by 200 basis points (bps) to 5% from 7%, effective March 28.

It will also cut the RRR for digital banks by 150 bps to 2.5%, while the ratio for thrift lenders will be reduced by 100 bps to 0%.

Rural and cooperative banks’ RRR has been 0% since October, the last time the BSP cut reserve requirements.

Mr. Ricafort said yields ended lower following the country’s exit from the Financial Action Task Force’s (FATF) “gray list.”

The FATF on Friday removed the Philippines from its list of jurisdictions under increased monitoring for “dirty money.”

The Philippines was on the gray list for over three years or since June 2021.

The central bank said the removal from the list will help the country attract more investments and lower remittance costs.