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BSP cuts longer-term TDF offering

By Joann Villanueva

October 25, 2017, 9:22 pm

MANILA - - Bangko Sentral ng Pilipinas’ (BSP) has cut offering for the Nov. 2 auction on longer-tenor Term Deposit Facility (TDF) from PHP 100 billion to PHP90 billion due to sustained under-subscription.

Offering for the shorter-term remains at PHP 40 billion, central bank data released  Wednesday showed.

BSP Deputy Governor Diwa Guinigundo said banks had been submitting lower bids for the 28-day facility for the Nov. 2 auction on account of the Nov. 1 holiday.

He said TDF tenders continue to show that there remains excess liquidity although tenders are now “smaller” than in the past.

He attributed this to banks’ stronger lending activities, dollar purchases to service imports and debt servicing requirements and investments in different financial products like government securities.

“Thus, the BSP does not have to mop up in a big way,” he said.

The BSP executive explained that “the economy is able to turn around and use their deposits as indicated by high loan to deposit ratio.”

“We should therefore adjust the volume of offerings particularly for the 28-day TDF, which has been undersubscribed for the last two weeks,” he said.

Guinigundo also said market preference remains on the short term securities “in the face of possible US Fed interest rate hike and lingering geopolitical uncertainty.”

“As we continue to monitor the market, we shall consider the unfolding market behavior and response to these key developments and adjust the volume of our open market operations accordingly,” he added.

Another factor for the cut in the offering for the longer-tenor TDF is fine-tuning of the setting of the Interest Rate Corridor (IRC), which the TDF is part of, BSP Governor Nestor A. Espenilla Jr.

The BSP explained that two factors should be considered in this development: the need for money as the domestic economy continues to grow and the foreign exchange market.

He pointed out that “as capital flows out of the country, and the BSP does tactical intervention, that basically drains liquidity from the system.”

He, however, stressed that monetary officials “need to do a deeper analysis” on the latter.

Meanwhile, rates of both TDF tenors fell Wednesday as bids are lower this week than last week.
Rate of the eight-day facility, which was really a seven-day facility, dropped to 1.0217 percent from last week’s 1.0973.

Tenders amounted to PHP40.868, lower than the Php43.893 billion bids last week. The auction committee made a full award for this tenor.

Rate of the 28-day facility declined to 0.7569 percent from 0.8756 percent in the previous auction.

Banks offered a total of PHP75.687 billion bids, lower than the PHP100 billion offering and the PHP87.562 billion bids submitted last week. The auction committee accepted all the bids. (PNA)

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