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TDF attracts P645.58-B bids

The auction of the Bangko Sentral ng Pilipinas’ (BSP) term deposit facility (TDF) received higher demand than offer but rates were mixed ahead of Thursday’s Monetary Board policy meeting that most of the market expect will not change the benchmark rate.

The BSP offered P500 billion TDF volume this week, more than November 11’s P480 billion. Tenders amounted to P645.58 billion, higher than the previous week’s P622.44 billion.

The 7-day TDF was offered at P190 billion from P180 billion last week. The tenor attracted P230.85 billion compared to P225.19 billion on November 11. The average rate went up to 1.9813 percent from 1.9720 percent.

The 14-day TDF also has a higher offer this week of P310 billion from P300 billion previously. Tenders reached P414.73 billion, significantly higher than P297.24 billion last week. The yield fell to 1.9984 percent from 2.0138 percent last week.

The BSP has yet to return the 28-day TDF which was last offered on September 30.

The Monetary Board’s November 19 policy meeting is its second to the last for the year. The BSP has cut key rates by 175 basis points (bps) since February as a response to the COVID-19 pandemic. It has implemented other measures to ensure there is sufficient liquidity in the financial system during the health crisis.

ING Bank senior economist Nicholas Mapa said that despite all of the BSP’s efforts, the “Philippines remains mired in recession amidst an ongoing 10-month lockdown with the economy losing steam.”

 “Additional monetary policy will likely deliver only a marginal impact as the efficacy of monetary stimulus fades with any further easing likely akin to BSP pushing on a string.  Lack of consumer and

business confidence are the reasons behind weak loan demand with market flush with liquidity and rates at historic lows,” said Mapa in a commentary Wednesday.

Mapa said the BSP will likely continue to “pause” from its rates’ cutting spree to “limit a deepening of

negative real policy rates” of 2.25 percent versus an inflation rate of 2.5 percent. But, he added, “(we) do not discount Governor (Benjamin) Diokno opting to provide some form of easing, either via a reduction in reserve requirements (RR) or a surprise 25 basis points (bps) rate cut, to provide token stimulus amidst fiscal policy’s cost cutting efforts.”     

He thinks the BSP is “under pressure to do something”.

 “BSP’s current real policy rates are now negative (-0.25 percent), which would generally force most central banks to pause from pushing policy rates further into the red.  We’ve also noted that additional conventional monetary policy easing may have a limited impact on bank lending with anemic loan growth tied more to lack of demand rather than lack of access,” said Mapa.

 “Nonetheless, faced with dimming growth prospects and recognizing that fiscal help is not likely coming in the next few months, BSP Governor Diokno may be under pressure to provide whatever form of stimulus he can muster, although we are not optimistic it will do much in terms of stimulating loan growth.  The recent spate of typhoons ensures that fourth quarter GDP will contract more severely than the third quarter drop of 11.5 percent, a development that BSP is likely taking into account ahead of its decision,” said Mapa.  

Source: Manila Bulletin (

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