TDF rates down; tenders top offers

Published January 2, 2020, 12:00 AM

by manilabulletin_admin

By Lee C. Chipongian

The central bank’s term deposit facility (TDF) attracted ₱153.43 billion tenders on Thursday versus offer of ₱90 billion.

MB file photo.
MB file photo.

All tenor rates were down this week, the TDF’s first auction in 2020. During the auction, the Bangko Sentral ng Pilipinas (BSP) said bids for the 6/7-day TDF were more than its ₱30 billion offer at ₱48.60 billion.

Yields fell to 4.2345 percent from 4.2776 percent. The 13/14-day TDF, offered lower this week at ₱30 billion from ₱40 billion last week, received ₱49.17 billion in tenders.

The average rate slipped to 4.3045 percent from 4.3337 percent. The 27/28-day tenor, also offered at ₱30 billion, was oversubscribed at ₱55.66 billion. The average rate declined to 4.3302 percent from 4.3542 percent.

BSP Governor Benjamin E. Diokno’s most recent “forward guidance” to the market – which finds him a “friendly” because of his penchant for disclosing as early as possible monetary policy stance – indicated a 50 basis points (bps) cut “at least” for 2020.

The BSP reduced 75 bps in the interest rates and closing 2019 at four percent.

Diokno also said that he will be toning down reduction in banks’ reserve requirements after a 400 bps cut last year, releasing ₱400 billion into the financial system.

ING Bank senior economist Nicholas Mapa said in a year-ender commentary that in 2019, “possibly the most important development has been the improved communication from the BSP with Diokno opting to utilize fully forward guidance to help market players prepare for any market moving changes.

Forward guidance has worked wonders with financial market volatility at a low despite successive rounds of easing from the BSP.”

Diokno assumed the BSP governorship last March 6 after the untimely death of Nestor A. Espenilla Jr. who was BSP chief for only 20 months.

“Improved communication from (Diokno) will likely help minimize volatility and foster financial stability, possibly one case where non-market moving events are a good thing,” said Mapa.

He also commented that the BSP’s 400 bps reserve requirement ratio (RRR) cuts last year has assured “ample liquidity” in the financial market “ahead of the big investment push (both public and private) while the 75 bps rate cut (BSP interest rates) will go a long way to revitalizing downbeat investment activity, which was negative for two quarters, as the ill effects of 2018’s rate hike cycle kicked in after the nine-month lag.”

The BSP held its last monetary policy meeting on December 12 and decided to not change the benchmark rate which remains at four percent on benign inflation outlook. The first Monetary Board policy meeting this year is on February 6.