By Lee C. Chipongian
The central bank offered P80 billion of term deposit facility (TDF) this week which was oversubscribed with yields continuing to drop after the Monetary Board cut the benchmark rate last September 26.
Banks’ submitted P114.77 billion worth of tenders with all tenors attracting more than offer, based on Bangko Sentral ng Pilipinas (BSP) data.
The 7-day TDF, still offered at P30 billion, received P38.63-billion bids versus P34.27 billion last October 2. Average rate fell to 4.2348 percent from 4.2501 percent previously.
The 14-day tenor which has more volume this week at P30 billion attracted P43.38-billion bids. Yields dropped to 4.2485 percent from 4.2547 percent last week.
The 28-day TDF, still offered at P20 billion, had tenders of P32.77 billion which was higher than last week’s P27.04 billion. Average rate slipped to 4.2754 percent from 4.3039 percent.
On Tuesday, BSP Governor Benjamin E. Diokno said they will now pause their previous dovish policy actions and observe the impact of the 75 basis points (bps) trial rates reduction on the economy. The Monetary Board cut interest rates three times this year – 25 bps each – on May 9, August 8 and September 26 on benign inflation outlook.
The data-dependent BSP is however not ruling out another cut to bank’s reserve requirement ratio (RRR) by December. The RRR is currently at 16 percent after a 200 bps reduction as of end-July this year. It will drop further to 15 percent after the first week of November following the Monetary Board decision last September 27 to slash the RRR by another 100 bps.
In reducing both the benchmark rate and the RRR, the Monetary Board still recognizes the manageable inflation environment and its continued decline. The BSP’s latest 2.5 percent inflation forecast for 2019 as of September 26 is lower than previous estimate of 2.6 percent (August 8).