TERM DEPOSIT yields went down on Wednesday as markets priced in the latest Philippine headline inflation data and amid a stronger peso.

The BSP’s term deposit facility (TDF) attracted bids amounting to P350.69 billion on Wednesday, above the P270 billion on the auction block as well as the P342.937 billion in bids seen a week ago for a P260-billion offer.

Broken down, tenders for the seven-day papers reached P198.58 billion, higher than the P160 billion auctioned off by the central bank. However, this was below the P213.622 billion in bids seen for the P150-billion offer of seven-day deposits in the previous week.

Banks asked for yields ranging from 5.985% to 6.04%, a narrower band compared with the 5.9755% to 6.06% seen a week ago. This caused the average rate of the one-week deposits to drop by 1.77 basis points (bps) to 6.0248% from 6.0425% previously.

Meanwhile, bids for the 14-day term deposits amounted to P152.11 billion, also higher than the P110-billion offering and the P129.315 billion in tenders for the same offer volume recorded on Dec. 4.

Accepted rates for the tenor ranged from 6% to 6.08%, also slimmer than the 6% to 6.11% margin recorded a week ago. With this, the average rate for the two-week deposits went down by 2.02 bps to 6.0614% from the 6.0816% logged in the prior week’s auction of 14-day papers.

The BSP has not auctioned off 28-day term deposits for over four years to give way to its weekly offerings of securities with the same tenor.

The term deposits and the BSP bills are used by the central bank to mop up excess liquidity in the financial system and to better guide market rates.

“The BSP TDF average auction yields again mostly eased slightly for the 12th straight week after local headline inflation settled at 2.5% in November 2024, still considered relatively benign and still within the BSP inflation target of 2-4%,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

Inflation quickened to 2.5% in November from 2.3% in October as food prices soared after a series of typhoons struck the country.

In the 11-month period, headline inflation averaged 3.2%, a tad higher than the BSP’s baseline forecast of 3.1% but well within its 2-4% annual target.

Within-target November inflation “could still warrant a possible local policy rate cut on Dec. 19,” Mr. Ricafort added.

The Monetary Board will hold its final policy review for the year on Dec. 19. BSP Governor Eli M. Remolona, Jr. earlier said they could either cut or keep rates steady at the meeting.

The BSP began its easing cycle in August this year and has delivered a total of 50 bps worth of cuts so far, bringing the policy rate to 6%.

Mr. Ricafort said the stronger peso recently also caused TDF yields to go down on Wednesday.

After closing at its record low of P59 per dollar on Nov. 21 and 26, the peso has since rebounded, even returning to the P57 level last week, partly boosted by seasonal remittance inflows.

On Wednesday, the local unit closed at P58.28 against the dollar, down by 27 centavos from Tuesday’s finish. — Luisa Maria Jacinta C. Jocson