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TDF yields drop on BSP’s policy easing

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YIELDS on the Bangko Sentral ng Pilipinas’ (BSP) term deposit facility (TDF) dropped on Wednesday as the central bank resumed offering the longest 28-day tenor and following the rate cut last week.

Total bids for the term deposits auctioned off by the BSP on Wednesday amounted to P441.631 billion, more than double the P210 billion on offer. This was also higher than the P418.775 billion in tenders seen last week for a P170-billion offer that only included the seven- and 14-day deposits.

The one-week papers recorded total tenders of P232.3 billion, higher than the P120 billion on the auction block but lower than the P278.475 billion logged the previous week.

Lenders sought yields ranging from 1.75% to 1.79% for the seven-day deposits, sharply lower than the 2.25% to 2.2505% band logged on June 24. With this, the average rate for the one-week papers stood at 1.7573%, down by 49.31 basis points (bps) from the 2.2504% recorded last week.

Meanwhile, the 14-day papers fetched total bids of P149.68 billion, going beyond the P70 billion up for grabs as well as the P140.3 billion in bids seen last week for the P50 billion on offer.

Banks asked for rates between 1.75% and 1.78% for the two-week deposits, also lower than the 2.25% to 2.251% range logged last week. This caused the average rate for the 14-day papers to drop by 49.86 bps to 1.7522% from the 2.2508% in the previous auction.

For 28-day term deposits, bids totaled P232.3 billion, surpassing the P120 billion auctioned off by the BSP as well as the P79.813 billion in tenders seen against a P50-billion program on March 11, which was when the papers were last offered.

Yields on the one-month papers ranged from 1.75% to 1.79%, plunging from the 3.675% to 3.78% band recorded in the March 11 auction. The average rate for the 28-day deposits stood at 1.7562%, sinking by 198.74 bps from the 3.7436% quoted previously.

The TDF is the central bank’s primary tool to shore up excess liquidity in the financial system and to better guide market interest rates.

“[The] auction results also reflect market preference for longer-tenor TDF amid ample liquidity in the financial system. The BSP will continue to assess current market developments and liquidity conditions in deciding on the volume of its TDF operations,” BSP Deputy Governor Francisco G. Dakila, Jr said in a statement.

“Strong market appetite as well as the 50-bp policy rate cut by the BSP effective 26 June 2020 led to further declines in TDF rates,” he added.

The Monetary Board cut benchmark rates by 50 bps last week. Rates now stand at record lows of 2.25%, 2.75 and 1.75% for the BSP’s overnight reverse repurchase, lending and deposit facilities, respectively.

The central bank has slashed rates by 175 bps so far this year as it looks to cushion the economic impact of the coronavirus disease 2019.

BSP Governor Benjamin E. Diokno earlier said they are maintaining an accommodative stance to ensure ample credit and liquidity amid the crisis.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the BSP’s decision to start offering the one-month papers after nearly four months is a sign of better liquidity in the financial system.

“This reflects the large/excess peso liquidity in the financial system that may have prompted the resumption of the 28-day TDF tenor to better manage the increased amount of liquidity sloshing around the economy,” he said.

BSP data showed domestic liquidity or M3, the broadest measure of money supply in an economy, rose by 16.2% to P13.6 trillion in April, faster than the 13.3% pace seen in March. — LWTN





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