Geopolitics, US Fed weigh on TDF auction

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AGGREGRATE bids continued to fall short of the weekly offering for term deposit facility (TDF) on Wednesday’s auction, as the market turned cautious about the global geopolitical situation and possible interest rate hikes in the US.

Out of the P180-billion offer, the Bangko Sentral ng Pilipinas (BSP) awarded more than P153 billion.

Bids for the seven-day tenor were oversubscribed at P65.50 billion, prompting the BSP to fully award the P40-billion offer.

But the 28-day TDF was undersubscribed anew, attracting only P113.97 billion. The BSP awarded only P113.97 billion against the weekly offer of P140 billion.


“Demand has shifted away from the 28-day tenor towards the 7-day tenor since April 12, likely because of increased caution in the market amid geopolitical concerns abroad and expectations of more rate hikes this year from the US Federal Reserve,” Guian Angelo Dumalagan, market economist at the Land Bank of the Philippines told The Manila Times.

The US central bank is scheduled to release its policy decision on Wednesday (Thursday in Manila) at the conclusion of its two-day meeting.

“The same concerns might keep demand for the seven-day tenor relatively stronger in the next few months,” Dumalagan said.

The BSP noted that banks find the relatively high rate for the seven-day TDF more attractive.

“BSP will continue to monitor bank liquidity positions as some reported that there is lower appetite for the 28 days as they are still refining positions after the long weekend,” BSP Governor Amando Tetangco Jr. said in a text message to reporters.

Tetangco said the BSP expects the seven-day tenor to continue attracting more bids as the seven-day average rate remains close to the 28-day rate.

The interest rate for the seven-day facility rose to 3.3080 from 3.3068, and for the 28-day tenor to 3.4558 from 3.4471 percent.

“The subscription for the 28 days may rise as funds come back to the banking system,” he said.

MAYVELIN U. CARABALLO

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