TDF rates down; tenders bigger than offer

Published February 19, 2020, 12:00 AM

by manilabulletin_admin

By Lee C. Chipongian

The Bangko Sentral ng Pilipinas’ (BSP) term deposit facility (TDF) were oversubscribed this week with P183.47 billion against an offer size of P130 billion which was lower than the previous P170 billion volume.

All average rates were down this week. Last February 6, the BSP key overnight rate was slashed by 25 basis points (bps) to 3.75 percent.

During Wednesday’s auction, the 7-day TDF, offered at P40 billion which was lower than February12’s P60 billion, attracted P66.42 billion while yields fell to 3.8301 percent from the previous 3.8943 percent.
The 14-day tenor also had a lower volume this week of P50 billion from P60 billion. Bids amounted to P57.72 billion while the average rate dipped to 3.8759 percent from 3.8772 percent.

The 28-day TDF, in the meantime, saw tenders reaching P59.33 billion versus offer of P40 billion. Last week, the volume was higher at P50 billion. This week’s average rate decreased to 3.8984 percent from 3.9054 percent.

Last week, BSP Governor Benjamin E. Diokno highlighted two events or factors that could influence growth and monetary policy in the next months – and consequently inflation and domestic liquidity.

Diokno said the COVID-19 outbreak “poses a downside risk to economic growth in 2020” while Brexit’s economic impact are short-term market volatility and investors’ increased risk-aversion.

The COVID-19 impact, based on the BSP’s initial assessment, will primarily affect tourism and associated services such as the hotels and restaurant businesses. “While recent demand indicators still point to a firm outlook for the domestic economy, the Monetary Board believes that a policy rate cut would provide additional policy support to ward off the potential spillovers associated with increased external headwinds,” said Diokno.

As for Brexit, the BSP chief said that the “data suggest that the direct impact of the Brexit on the domestic real economy would be limited” since the gross placements of foreign direct investment (FDI) from the United Kingdom is just about 0.7 percent of the country’s total FDI, while foreign portfolio investments accounts for 29.7 percent for January-August 2019.