The Bangko Sentral ng Pilipinas’ term‑deposit facility posted a higher average yield for the fourth consecutive week, reflecting market expectations of additional policy‑rate hikes.
Bids for the latest auction reached 165.372 billion pesos, surpassing the 130 billion‑peso offering and exceeding the 143.054 billion pesos tendered for a 120‑billion‑peso issue the week before.
The bid‑to‑cover ratio rose to 1.2721, up from 1.1921 in the previous session, and the central bank allocated the full 130 billion‑peso tranche.
Accepted rates for the one‑week deposits remained between 4.25 % and 4.75 %, with the weighted‑average accepted rate climbing to 4.7174 % from 4.7079 % a week earlier.
A senior economist noted that the average auction yield was slightly higher week‑on‑week yet still below the key overnight borrowing rate of 4.75 %, indicating excess peso‑fund liquidity in the system.
The modest yield increase aligns with expectations of further monetary tightening, even as headline inflation eased, due to lingering price pressures from the Middle‑East conflict and a weaker peso.
Headline inflation slowed to 6.4 % in June from 6.8 % in May, marking a second consecutive month of deceleration and the lowest pace since March’s 4.1 % reading.
Despite the slowdown, inflation has remained above the central bank’s 2 %–4 % tolerance band for four straight months, with the consumer‑price index averaging 4.8 % in the first half of the year.
Core inflation, which excludes volatile food and fuel items, rose to 4.4 % in June, the fastest increase in 31 months, signaling broader price pressures.
The central bank cautioned that rising core inflation could generate second‑round effects and elevate inflation expectations.
The governor indicated that the economy can absorb one more 25‑basis‑point hike, anticipating a rebound in growth this semester driven by accelerated government spending.
Since April, the Monetary Board has raised the benchmark borrowing cost by a total of 50 basis points to curb spiraling prices and anchor expectations amid the global oil shock.
Iran’s Revolutionary Guard threatened to close additional export corridors after the Strait of Hormuz was shut and a U.S. naval blockade was reimposed, while the United States launched a new round of strikes aimed at degrading Iranian capabilities targeting commercial shipping.
Hostilities between Iran and the United States reignited last week, breaking a fragile truce that had held since June.
The central bank employs the term‑deposit facility and BSP bills to absorb excess liquidity and guide market yields toward its policy rate.
Weekly term‑deposit offerings have been limited to a single tenor to streamline liquidity operations and improve monetary‑policy transmission.
As of early June, market operations have removed roughly 1.3 trillion pesos of excess liquidity, with about 6.9 % of that amount absorbed through the term‑deposit facility.
