TDF auction bears brunt of geopolitics


THE term deposit facility (TDF) auction on Wednesday failed to draw enough bids due to geopolitical uncertainties, according to an analyst.

Out of the P180-billion offer, the Bangko Sentral ng Pilipinas (BSP) awarded only more than P116 billion.
Bids for the seven-day tenor were oversubscribed at P41.34 billion, prompting the BSP to fully award the P30-billion offer.

But the 28-day TDF was undersubscribed at P86.16 billion, prompting the BSP to award only P86.16 billion against the weekly offer of P150 billion.

The interest rate for the seven-day facility rose to 3.3615 percent from 3.2109 percent, and to 3.4565 from 3.4499 percent for the 28-day tenor.

“Preference for the short end indicates cautiousness among participants, given the geopolitical uncertainties in Asia and the Middle East as well as the political trends in the EU [European Union],” said Bank of the Philippine Islands Vice President and lead economist Emilio Neri Jr.

Agence France-Presse reported the United States will counter any provocation by North Korea with “overwhelming and effective” response. The US reassured allies fretting over Pyongyang’s quickening missile program, and its apparent readiness to carry out another nuclear test in its quest to develop an atomic weapon that can hit the US mainland.

In the Middle East, the news service said the evacuation of civilians and fighters from besieged Syrian towns resumed on Wednesday after Saturday’s bombing in Rashidin, which killed 126 people.

In the EU, British Prime Minister Theresa May announced a general election in June to shore up her mandate in taking Britain out of the EU.

On the other hand, Turkey’s opposition on Tuesday demanded the annulment of sweeping constitutional changes boosting President Recep Tayyip Erdogan’s powers, claiming vote-rigging had swung the results. The EU also urged a probe into poll fraud claims as international observers voiced concerns.


ING Bank Manila senior economist Joey Cuyegeng sees the TDF auction normalizing in the near term.

“Liquidity is likely to normalize in the next few weeks as funds that have funded not only the P181 billion retail Treasury bonds issuance and seasonal tax payments are brought partially back to the banking system, either as government deposits to Land Bank of the Philippines and Development Bank of the Philippines and government expenditures which seems to have accelerated in March,” he said.

Cuyegkeng said short-term interest rates started to gradually moderate, indicating that expectations of normalization could happen sooner rather than later.

He said the BSP is likely to consider changing the weekly amounts if interest rates shoot up.

“We do not believe there is necessity to change current settings,” he pointed out.

In response to feedback and discussions with industry counterparties, the BSP announced that the volume details will be posted a week earlier instead of a two-week lead beginning with the May 3, 2017 auction.
“Thus, the offer volumes for the 3 May 2017 TDF auction will be posted by 26 April 2017,” it said.


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