By Lee C. Chipongian
The auction of the central bank’s term deposit facility (TDF) attracted bids to the 7-day and 14-day tenors but only the TDF one-week had a higher yield, based on Bangko Sentral ng Pilipinas (BSP) data.
For the past four auctions, the TDF showed mixed results after the volume was gradually raised by ₱100 billion, from ₱80 billion at the end of October to ₱180 billion last week.
There was increased liquidity in the financial system after the BSP slashed 400 basis points (bps) off banks’ reserves requirement ratio (RRR), plus other adjustments to RRR that affected money supply.
During Wednesday’s auction, yields were mixed ahead of today’s (Thursday) Monetary Board policy setting meeting, its last for 2019.
The 7-day TDF, still offered at ₱60 billion, attracted ₱66.83-billion tenders, more than last week’s ₱56.57 billion. The average rate rose to 4.3040 percent from 4.2834 percent.
The 14-day tenor, also offered at ₱60 billion, had bids amounting to ₱69.99 billion. It was higher than December 4’s ₱67.39 billion. The yield fell to 4.3249 percent from 4.3310 percent last week.
The 28-day TDF’s offer is adjusted higher this week at ₱60 billion from ₱50 billion last week. Tenders were lower than offer however at ₱44.71 billion. The average rate was down to 4.3496 percent from 4.3522 percent.
BSP Governor Benjamin E. Diokno has said that a pause is warranted in terms of monetary policy, and that presently, the BSP’s policy stance is appropriate. He commits to being data dependent in setting benchmark rates. One of the key numbers they will consider is the higher November inflation which both the BSP and the market had expected.
Diokno also said that they are done reducing RRR for 2019 and that there will be no more cuts this month after decreasing the ratio from 18 percent to 14 percent.
Diokno said he’s in no hurry after the “rapid fire” cuts in both the RRR and policy rate. He reiterated that he still has three years or until mid-2023 to bring the RRR to single-digit levels.