Banks' bid P160B TDF; all yields up
Published Nov 13, 2019 12:00 am
By Lee C. Chipongian
The central bank added P40 billion to this week’s term deposit facility (TDF) for a total P160 billion but banks bid mixed and propping yields higher ahead of the Monetary Board policy meeting today (Thursday).
MB file photo.
During Wednesday’s auction, total tenders reached P160.18 billion, barely topping the auction cap, based on Bangko Sentral ng Pilipinas (BSP) auction results.
It was a slow day for the 7-day TDF which despite a P60 billion offer which was more than last week’s P40 billion, it only managed to attract P48.06 billion. The average rate however rose to 4.2264 percent from 4.1923 percent.
The mid-tenor or the 14-day received P57.80 bids, surpassing its P50 billion auction size. This was higher than November 6’s P40 billion. Yields also went up to 4.3184 percent from 4.2336 percent.
The 28-day also exceeded its P50 billion offer with P54.32 billion bids. Its average rate increased to 4.3597 percent from the previous 4.3122 percent.
The BSP has been busy adjusting and tweaking the TDF volume every week following three cycles of interest rates cut and the reduction of banks’ reserve requirement ratio (RRR) by 300 basis points (bps) as of last week. By next month, after slashing another 100 bps off the RRR, the BSP would have released a total P400 billion for the 400 bps cut.
The central bank found opportunity to implement RRR cuts because the inflation environment was decelerating faster than anticipated. The BSP said inflation rate has bottomed out in October at 0.8 percent, bringing the year-to-date rate to 2.6 percent.
The Monetary Board’s policy meeting today is expected to be a hold decision, based on market commentaries, after the BSP reduced the key rate by 75 bps this year.
ING Bank senior economist Nicholas Mapa said the market consensus “points to a pause” and analysts expect the BSP to not do anything today (Thursday).
“The self-professed ‘pro-growth’ (BSP) Governor (Diokno) moved swiftly to unwind BSP’s previous rate hike cycle, cutting policy rates by a cumulative 75 bps year to date but recently indicated that the current monetary stance is ‘appropriate’.”
As for RRR cuts, Mapa thinks the BSP will keep to a watch mode as it assess the impact of the RRR reductions to domestic liquidity and banks’ lending activity.
Any rate action will resume in the first quarter 2020, he added. “We are currently penciling in up to 50 bps worth of rate cuts in 2020, with the first move possibly as early as the first quarter should full year 2019 GDP come in right at the lower-end of the government target of six percent. Meanwhile, we expect Diokno to continue his directive to lower the RR in a phased and well-telegraphed manner with up to 200 bps worth of reduction carried out evenly throughout the course of 2020.”
MB file photo.
During Wednesday’s auction, total tenders reached P160.18 billion, barely topping the auction cap, based on Bangko Sentral ng Pilipinas (BSP) auction results.
It was a slow day for the 7-day TDF which despite a P60 billion offer which was more than last week’s P40 billion, it only managed to attract P48.06 billion. The average rate however rose to 4.2264 percent from 4.1923 percent.
The mid-tenor or the 14-day received P57.80 bids, surpassing its P50 billion auction size. This was higher than November 6’s P40 billion. Yields also went up to 4.3184 percent from 4.2336 percent.
The 28-day also exceeded its P50 billion offer with P54.32 billion bids. Its average rate increased to 4.3597 percent from the previous 4.3122 percent.
The BSP has been busy adjusting and tweaking the TDF volume every week following three cycles of interest rates cut and the reduction of banks’ reserve requirement ratio (RRR) by 300 basis points (bps) as of last week. By next month, after slashing another 100 bps off the RRR, the BSP would have released a total P400 billion for the 400 bps cut.
The central bank found opportunity to implement RRR cuts because the inflation environment was decelerating faster than anticipated. The BSP said inflation rate has bottomed out in October at 0.8 percent, bringing the year-to-date rate to 2.6 percent.
The Monetary Board’s policy meeting today is expected to be a hold decision, based on market commentaries, after the BSP reduced the key rate by 75 bps this year.
ING Bank senior economist Nicholas Mapa said the market consensus “points to a pause” and analysts expect the BSP to not do anything today (Thursday).
“The self-professed ‘pro-growth’ (BSP) Governor (Diokno) moved swiftly to unwind BSP’s previous rate hike cycle, cutting policy rates by a cumulative 75 bps year to date but recently indicated that the current monetary stance is ‘appropriate’.”
As for RRR cuts, Mapa thinks the BSP will keep to a watch mode as it assess the impact of the RRR reductions to domestic liquidity and banks’ lending activity.
Any rate action will resume in the first quarter 2020, he added. “We are currently penciling in up to 50 bps worth of rate cuts in 2020, with the first move possibly as early as the first quarter should full year 2019 GDP come in right at the lower-end of the government target of six percent. Meanwhile, we expect Diokno to continue his directive to lower the RR in a phased and well-telegraphed manner with up to 200 bps worth of reduction carried out evenly throughout the course of 2020.”