TDF rates lower, oversubscribed
Published Aug 14, 2019 12:00 am
By Lee C. Chipongian
Banks continue to have high demand for the term deposit facility (TDF) of the Bangko Sentral ng Pilipinas (BSP) with fresh funds from required reserves' cut, and pushing the yields down after the benchmark rate.
The BSP offered P100 billion this week, higher than August 7’s P80 billion. Total bids amounted to P137.14 billion.
The 7/8-day TDF, offered at P40 billion from the previous week’s P30 billion, attracted tenders amounting to P51.25 billion. The average rate fell to 4.4389 percent from the previous week’s 4.5844 percent.
The 14-day tenor, still offered at P30 billion, were also oversubscribed at P40.75 billion, although lower compared to the previous Wednesday’s P44.43 billion. The average rate declined to 4.4905 percent from 4.6176 percent last week.
The longest-dated 28-day had bids amounting to P45.14 billion, more than offer of P30 billion. The volume is higher compared to the previous week’s P20 billion. The average rate dropped to 4.4961 percent from August 7’s 4.6033 percent.
The BSP’s Monetary Board cut benchmark overnight rate by 25 basis points (bps) last Thursday, on account of a within-target inflation rate which they expect will continue until 2021.
While the August 8 Monetary Board policy meeting did not discuss the next phase reserve requirement ratio (RRR) reduction, BSP Governor Benjamin E. Diokno said the RRR is a “live” topic in the Monetary Board, which means they can take it up any time, and make a decision to cut RRR off-cycle as well.
Diokno said after they cut the policy rate which they did last week, they will follow it up with another series of RRR reduction.
The BSP’s latest inflation forecast for 2019 is 2.6 percent and 2.9 percent for both 2020 and 2021, against a target of two-four percent.
The BSP’s overnight reverse repurchase facility after a 25 bps cut is now reduced to 4.25 percent. The rates on the overnight deposit and lending facilities were also reduced to 3.75 percent and 4.75 percent, respectively.
The TDF is the central bank’s liquidity absorption facility, along with RRP. So far, with a 200 bps cut to the RRR as of end-July, bulk of these funds found their way back to the BSP’s term placements, some in government securities and so far, none as bank lending.
BSP officials however expect to see more bank lending activity in the coming months as there are additional RRR cuts that are pending and are anticipated by the market. For every 100 bps cut to the RRR, an estimated P95-100 billion of fresh liquidity is released to the financial system.
The BSP offered P100 billion this week, higher than August 7’s P80 billion. Total bids amounted to P137.14 billion.
The 7/8-day TDF, offered at P40 billion from the previous week’s P30 billion, attracted tenders amounting to P51.25 billion. The average rate fell to 4.4389 percent from the previous week’s 4.5844 percent.
The 14-day tenor, still offered at P30 billion, were also oversubscribed at P40.75 billion, although lower compared to the previous Wednesday’s P44.43 billion. The average rate declined to 4.4905 percent from 4.6176 percent last week.
The longest-dated 28-day had bids amounting to P45.14 billion, more than offer of P30 billion. The volume is higher compared to the previous week’s P20 billion. The average rate dropped to 4.4961 percent from August 7’s 4.6033 percent.
The BSP’s Monetary Board cut benchmark overnight rate by 25 basis points (bps) last Thursday, on account of a within-target inflation rate which they expect will continue until 2021.
While the August 8 Monetary Board policy meeting did not discuss the next phase reserve requirement ratio (RRR) reduction, BSP Governor Benjamin E. Diokno said the RRR is a “live” topic in the Monetary Board, which means they can take it up any time, and make a decision to cut RRR off-cycle as well.
Diokno said after they cut the policy rate which they did last week, they will follow it up with another series of RRR reduction.
The BSP’s latest inflation forecast for 2019 is 2.6 percent and 2.9 percent for both 2020 and 2021, against a target of two-four percent.
The BSP’s overnight reverse repurchase facility after a 25 bps cut is now reduced to 4.25 percent. The rates on the overnight deposit and lending facilities were also reduced to 3.75 percent and 4.75 percent, respectively.
The TDF is the central bank’s liquidity absorption facility, along with RRP. So far, with a 200 bps cut to the RRR as of end-July, bulk of these funds found their way back to the BSP’s term placements, some in government securities and so far, none as bank lending.
BSP officials however expect to see more bank lending activity in the coming months as there are additional RRR cuts that are pending and are anticipated by the market. For every 100 bps cut to the RRR, an estimated P95-100 billion of fresh liquidity is released to the financial system.