Central bank to adjust TDF offers as demand wanes, issue own debt

AUCTIONS FOR THE term deposit facility (TDF) of the central bank will be “adjusted accordingly” as the preference for cash meant for holiday spending starts to subside in January, according to Bangko Sentral ng Pilipinas (BSP) Monetary Policy Sub-Sector Officer-In-Charge Dennis D. Lapid said on Friday.

In the same briefing, the central bank chief said the BSP is also looking to start floating its own debt securities within the year to boost its market operations.

“If you notice in December, also in November, we were undersubscribed in some of our weekly auctions because there

were higher preferences by the public for cash for holiday spending,” he told reporters in a press chat on Friday held at the central bank.

The Bangko Sentral ng Pilipinas offered a total of P160 billion on term deposits last Wednesday. This offering was met with bids amounting to P274.15 billion. Despite this, yields continued to be relatively lower compared to the previous week.

“If you look at the market interest rates, they actually have gone down… So there is a gradual and general easing in fund conditions in the market…,” Mr. Lapid said, noting that they expect liquidity to return to the system in January.

He also noted both bank lending and money supply growth have quickened, based on recent data.

Bank lending in November grew at a faster pace of 10.1% from 9.3% in the previous month. Meanwhile, money supply saw a quicker expansion of 9.8% from the 8.5% print logged in October, according to data from the BSP.

“So it shows a gradual pickup in liquidity and specifically bank lending activity,” Mr. Lapid said.

Aside from the TDF, BSP Governor Benjamin E. Diokno said the BSP will also be offering securities in the second quarter of 2020 following the amendment of its charter allowing it to issue its own debt papers.

“We will have a soft launching by first quarter and we will launch it formally in the second quarter this year,” Mr. Diokno said during the press chat.

Mr. Lapid said the central bank will hold a market-sounding exercise in the first quarter.

“We will be discussing with counter-parties the features of the new securities and just to get an idea on their preferences. We are also working with the Bureau of the Treasury…” he said.

Republic Act 11211 or the New Central Bank Act allows the BSP to issue securities, aside from the TDF.

In accordance with the law, the Bureau of Internal Revenue is exempting the BSP from paying taxes from its revenues coming from the said securities.