TDF yields mixed; bids hit ₱175.53 B

Published December 4, 2019, 12:00 AM

by manilabulletin_admin

By Lee C. Chipongian

The central bank’s term deposit facility (TDF) continue to have mixed results with P175.53 billion tenders versus offer of P170 billion.

The TDF auction has a lower volume this week compared to P180 billion on November 27. The 7-day was offered at P60 billion from P70 billion last week, the 14-day at P60 billion from P50 billion, while the 28-day TDF was auctioned off at P50 billion from P60 billion, based on Bangko Sentral ng Pilipinas (BSP) data.

“The downward adjustment in the offer volume was in view of expected holiday-related spending,” said
the BSP.

On Wednesday, the 7-day TDF received P56.57 billion tenders while the average rate went up to 4.2834
percent from 4.2508 percent.

The 14-day TDF had bids worth P67.39 billion while yields fell to 4.3310 percent from 4.3424 percent.
The longest-dated TDF, the 28-day, attracted P51.59 billion in bids while the average rate increased to 4.3522 percent from 4.3321 percent in the previous Wednesday.

According to the BSP, there was a “slight” undersubscription in the 7-day TDF but the 14-day and 28-day tenors were oversubscribed. “Average rates for the 7-day and 28-day tenors slightly increased by 3.26 basis points (bps) and 1.98 bps, while that for the 14-day TDF declined by 1.14 bps. Results of today’s auction remain in line with the BSP’s expectations.”

The BSP’s Monetary Board will hold its last policy meeting next week, December 12, and the market expects the BSP to keep its “pause” decision of November 14. The policy rates were increased by 75 basis points (bps) this year compared to 175 bps in 2018. The benchmark rates were raised last year to combat inflation which peaked at 6.7 percent in September and October.

For this year, the BSP forecasts 2.5 percent average inflation versus 2018’s 5.2 percent.
The government will release the November inflation today (Thursday) and the BSP had earlier said it expects the numbers to settle within the range of 0.9 percent to 1.7 percent, compared to October’s 0.8 percent.

On November 14, during its seventh Monetary Board policy meeting for the year, the BSP decided to pause and kept the benchmark rate at four percent.

BSP Deputy Governor Francisco G. Dakila Jr. said the prevailing monetary policy settings remain appropriate, and that benign inflation outlook and “firm” domestic economic growth outlook has allowed the BSP to keep rates steady.
Dakila reiterated that inflation which dropped to 0.8 percent in October and currently averages at 2.6 percent year-to-date, has bottomed out in October. He expects the rate to “move closer to the mid-target in 2020 and 2021 as baseline effects begins to dissipate” with the tapering off of the impact of the rice tarrification and the acceleration of domestic growth.