TDF yields pick up as of­fer still un­der­sub­scribed

Business World - - BANKING & FINANCE - By Melissa Luz T. Lopez Se­nior Re­porter

YIELDS un­der the term de­posit fa­cil­ity (TDF) picked up yes­ter­day as the trimmed auc­tion vol­umes went un­der­sub­scribed, even as banks wanted to park more funds un­der the month­long in­stru­ments of­fered by the cen­tral bank.

To­tal bids re­ceived for Wed­nes­day’s auc­tion stood at P139.271 bil­lion, pick­ing up from the P127.333 bil­lion ten­ders the pre­vi­ous week, as mar­ket play­ers crowded the 28day term de­posits.

Of­fers for the seven-day tenor dipped to P37.829 bil­lion from the P42.918 bil­lion tal­lied last Sept. 6 and lower than the P40 bil­lion which the cen­tral bank placed on the auc­tion block. As a re­sult, the av­er­age yield climbed to 3.3484% from 3.3334%.

On the other hand, de­mand for the 28-day term de­posits jumped to P101.442 bil­lion yes­ter­day from just P84.415 bil­lion which banks wanted to leave with the Bangko Sen­tral ng Pilip­inas (BSP) last week, but still short of the P110-bil­lion of­fer­ing.

Still, av­er­age rates sought by the lenders inched higher to 3.495% against last week’s 3.491% av­er­age, as the bids ranged within 3.45% to 3.5% which hov­ered close to the cen­tral bank’s ceil­ing rate.

The TDF is cur­rently the cen­tral bank’s main tool to ar­rest ex­cess money sup­ply in the fi­nan­cial sys­tem, where banks can park idle funds • or those which are not de­ployed for loans or re­serves • for a small re­turn.

This week also marks the sec­ond time that the BSP auc­tioned off P150 bil­lion in term de­posits, lower than the P180 bil­lion they of­fered over the last nine months.

Sought for com­ment, BSP Deputy Gover­nor Diwa C. Guini­gundo said mar­ket liq­uid­ity re­mains am­ple de­spite yes­ter­day’s auc­tion re­sults, point­ing out that rates moved gen­er­ally side­ways.

He added that while the mar­ket still prefers short- termed pa­pers, some in­vestors are now tak­ing chances with longer tenors amid ris­ing ex­pec­ta­tions that in­ter­est rates in the United States as well as global yields will re­main steady for the rest of 2017.

“The sit­u­a­tion con­tin­ues to be very fluid. I be­lieve the mar­ket still prefers short tenors although with the prob­a­bil­ity of a US Fed[eral Re­serve] funds rate in­crease di­min­ish­ing this year, some seg­ments may test longer than 7 days,” Mr. Guini­gundo said in a text mes­sage to re­porters, not­ing that mar­ket ap­petite is also “bound to change” once the govern­ment is­sues more bonds to sup­port its P8.44-tril­lion in­fra­struc­ture spend­ing plan.

“What is im­por­tant at this point is that the in­ter­est rate dy­nam­ics is broadly steady, in­ter­est rate volatil­ity re­mains man­age­able,” the cen­tral bank of­fi­cial added.

The US Fed­eral Re­serve is get­ting more dovish in the face of weak in­fla­tion data, re­duc­ing the like­li­hood of a third rate hike this year, which traders al­ready see as very un­likely.

Three Fed pol­icy mak­ers ear­lier this month ex­pressed doubts about fur­ther rate hikes, with one in­flu­en­tial pol­icy maker call­ing for a de­lay in rais­ing US in­ter­est rates un­til the Fed is con­fi­dent in­fla­tion will re­bound.

Mr. Guini­gundo said last week that the mon­e­tary author­ity is con­sid­er­ing to in­tro­duce new tenors for the TDF which may be an­nounced later this year, with their de­ci­sion to de­pend on the feed­back from banks that vie for the weekly auc­tions.

Next week, the BSP will again try to sell P150 bil­lion in term de­posits, split be­tween the sev­en­day tenor worth P40 bil­lion and the 28-day pa­pers worth P110 bil­lion. •

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