TDF is less than underwriting; BSP cites cash preference, passing rate hike

The preference for cash as a method of holidays, coupled with the recent interest rate hike implemented by the Monetary Board, resulted in the Bangko Sentral ng Pilipinas (BSP) Term Deposit Facility (TDF) being undersubscribed.

On Tuesday, BSP accepted 232.469 billion pesos out of the 233.469 billion tenders it received for the TDFs. BSP awarded 110.737 billion pesos from 111.737 billion bids in a period of 8 days and accepted all bids received in a period of 15 days amounting to 121.732 billion pesos.

The total bid volume between the 8 and 15 day periods was allocated at 180 billion pesos from 200 billion and 150 billion from 160 billion respectively.

“TDF auction results continue to reflect the passage of policy rate hikes on the basis of the last settlement. Additionally, lower subscriptions can be attributed to counterparties’ increased preference for cash in preparation for the holidays,” said BSP Deputy Governor Francisco D’Aquila Jr.

He added, “Going forward, the BSP’s cash operations will continue to be guided by its assessment of the latest liquidity conditions and market developments.”

The weighted average interest rates generated by bids awarded in both periods continued to rise from last week.

The 8-day TDF’s WAIR rose 25.9370 basis points to 5.7514%, while the 15-day TDF rose 20.2688 basis points to 5.8662%.

Acceptable returns similarly turned higher, but narrowed to a range of 5.4900 to 6.0250 percent in the 8-day period and 5.6000 to 6.1750 percent in the 15-day period.

Earlier, the decision of Bangko Sentral ng Pilipinas (BSP) to raise interest rates due to recent policy actions of the US Federal Reserve may dampen the country’s growth prospects, according to the National Economic and Development Authority (Neda) and local economists.

The recent decision by the Monetary Board to raise interest rates by 75 basis points increased the rate of the overnight repo facility in the Bills Settlement Payment System (BSP) to 5 per cent from 4.25 per cent.

BSP Governor Felipe Medalla said that in light of the 75 basis point increase in US interest rates, the Monetary Board will match the policy actions of the US Federal Reserve in setting its next policy rate on November 17 (Full story: .ph/2022/11/03/bsp-to-increase-interest-rates-by-75bps/).###

Image credits: Noni Reyes

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