By Lee C. Chipongian
The Bangko Sentral ng Pilipinas’ (BSP) auction of its term deposit facility (TDF) on Wednesday received one of its highest tenders at ₱276.22 billion against offer of ₱120 billion as banks – with plenty cash — snapped up all tenors.
Yields went down for all TDF offers due to increased demand.
The 7-day TDF auction attracted tenders amounting to ₱102.18 billion. It was offered at ₱40 billion, more than the previous week’s ₱30 billion. The average rate was down to 4.2364 percent from 4.3045 percent.
The 14-day tenor, also offered at ₱40 billion versus ₱30 billion last January 2, was oversubscribed at ₱88.91 billion. Yields fell to 4.2364 percent from 4.3045 percent.
The longest-dated 28-day, with the same volume, attracted tenders of ₱85.14 billion. Its average rate decreased to 4.2704 percent from the previous 4.3302 percent.
This is the second auction this month and both transactions saw TDF yields going down.
BSP Governor Benjamin E. Diokno, who in December disclosed that he sees at least a 50 basis points (bps) cut this year, said recently that the BSP policy rate reduction could come sooner, or as soon as this quarter.
ING Bank senior economist Nicholas Mapa speculates that the first policy rate cut for 2020 could happen on February 6, the first Monetary Board policy meeting for the year. This is after the December inflation came in at 2.5 percent, bringing the 2019 average at 2.5 percent which was higher than BSP’s 2.4 percent estimate.
Mapa said he expects inflation to “edge higher in 2020 as ‘reverse’ base effects kick in while the scheduled excise tax of fuel products take effect sometime in early 2020. This moves in-line with our expectation for inflation to ‘bounce then settle’ with headline inflation rising back to the three percent handle and remain stable for the rest of 2020.”
He added that with the reverse base effects, inflation could reach as high as 3.4 percent this year due to higher oil prices and supply side disruptions.
“The surprise inflation print in December should keep the BSP on notice as they gauge price developments going into 2020,” said Mapa. He sees additional price or inflationary pressures coming from the US-Iran tensions.