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BSP unlikely to introduce another TDF tenor

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Facade of the Bangko Sentral ng Pilipinas along Roxas Boulevard -- BW FILE PHOTO

By Melissa Luz T. LopezSenior Reporter

THE CENTRAL BANK is unlikely to introduce a new tenor for its term deposit facility (TDF) anytime soon, a senior official said, with the focus now on slowly raising the weekly auction volumes.

Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa C. Guinigundo said they are not considering a new maturity for the weekly term deposit auctions as of the moment.

“We don’t want to surprise the market. We added the 14-day tenor based on our consultation with our counterparties, and they indicated strong interest in an intermediate tenor such as 14 days,” Mr. Guinigundo told reporters on Friday.

“The seven and 28 days remained in contention in the sense that based on our survey with our counterparties, there are still many of them who have expressed interest in investing in the 28 days.”

Any excess cash they hold which have not been deployed for loans, foreign exchange and debt payments can be parked under the central bank window in order to make small gains, which in turn is expected to bring market rates closer to the 3% benchmark set by the BSP.

The BSP expects to use “auction-based” operations to have a better handle on market loan rates, after it introduced a one percentage point cut in the reserve requirement ratio imposed on universal and commercial banks. The cut, which took effect last Friday, will unlock some P90 billion in the system.

The central bank introduced the two-week tenor last Feb. 14 with a P20-billion offer, which was later on raised to P40 billion.

Mr. Guinigundo pointed out that introducing a new tenor would need a fresh round of consultations with banks to check whether there will be demand. There are limited options for a new maturity — possibly a 21-day term — as going beyond a month-long tenor could crowd out demand for the 91-day Treasury bills.

Mr. Guinigundo said they are carefully assessing money supply conditions as they time the introduction of even bigger TDF volumes, especially now that the weekly offerings stand as the main monetary tool to influence loan pricing.

“If we increase immediately the volume of TDF, that could also impinge on the ability of the banks to service the requirements of their clients especially for loans and for some of their clients who would wish to buy foreign exchange for their imports and investment purposes,” the BSP official said.

“It is a process. We cannot accelerate the process without first monitoring the developments as well as the temperament of our counter parties.”

This week, the central bank will be offering P110 billion under the TDF, broken down into P50 billion under a week-long term, P40 billion for a 14-day tenor, and P20 billion under a month-long maturity.