• Bets on more Fed rate hikes hit Philippine TDF auction

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    HINTS of more interest rate hikes in the United States hit the longer tenor of the term deposit facility (TDF) during Wednesday’s.

    Out of the P180 billion offer, the Bangko Sentral ng Pilipinas (BSP) awarded only P123 billion.

    Bids for the seven-day tenor were oversubscribed at P78.32 billion, prompting the BSP to fully award the P40 billion offer.

    But the 28-day TDF was undersubscribed anew, attracting only P83.35 billion. The BSP awarded P83.35 billion against a weekly offer of P140 billion.

    “Investors are staying away from the longer dated facility amid bets of more US rate hikes ahead,” said Land Bank of the Philippines market economist Guian Angelo Dumalagan.

    “In times of uncertainty, short-term instruments are more appealing as they are less exposed to interest rate risk,” he added.

    New York Fed President William Dudley declared that a tight labor market will eventually trigger a rebound in the unexpectedly weak inflation data, and said he is confident the US expansion has further to go, while cautioning of risks in not raising interest rates.

    Last week, the Fed raised benchmark interest rates, citing a better labor market and moderately improving economic activity. The US central bank also projected a third rate increase this year, essentially brushing aside weaker inflation and consumption data in recent weeks.

    The interest rate for the seven-day facility declined to 2.9904 percent from 3.0648 percent, while the 28-day tenor fell to 3.4764 percent from 3.4882 percent.

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