TDF rates up this week ahead of MB meeting
The central bank’s term deposit facility (TDF) fetched higher yields yesterday in anticipation of the Monetary Board meeting today (Thursday) where bets are on for a likely 50 basis points hike of key overnight rates.
Based on Bangko Sentral ng Pilipinas’ (BSP) auction results, while subscriptions were more than offer of 3100 billion, the bids were lower at 3 110.18 billion compared to the previous week’s 3120.67 billion.
The 7-day tenor was oversubscribed – the only one – at 365.44 billion versus offer of 340 billion. It was higher than last week’s tendered amount of 351.93 billion. The average rate rose to 3.7797 percent from the previous week’s 3.7405 percent.
The 14-day TDF received lower bids of 333.28 billion from offer of 340 billion. It was also lower than the previous Wednesday’s 3 49.80-billion tenders. Yields were up at 3.9234 percent from 3.9016 percent.
The 28-days had tenders of only 3 11.46 billion, undersubscribed from its 320billion offer. Last week, the tenor also had lukewarm results, just below of the offer at 318.94 billion. Average rate went up to 3.9620 percent from 3.9605 percent.
The interest rate corridor (IRC) was adopted by the BSP two years ago to expand its policy toolkit for monetary control. The TDF, in particular, allowed the BSP to reduce banks’ reserve requirement ratio twice this year as – according to BSP Governor Nestor A. Espenilla Jr. – part of operational adjustments.
The IRC helps the BSP guide short-term market rates closer to the overnight reverse repurchase borrowing rate. In May and in June, the BSP raised the policy rate by 50 basis points combined.
Espenilla has been saying over the past week that when they meet tomorrow (Thursday) for its fifth monetary policy meeting for 2018, they will decide on a “strong followthrough monetary adjustment” to keep the 2019 inflation within its expectation of not more than four percent. They have already given up on this year’s inflation which has averaged at 4.5 percent in the first seven months – more than the two-four percent target for the year.