BSP Says NDF Pretermination No Longer Allowed

Central bank officials met today to discuss new rules on capital inflow controls.

According to officials, the need for new regulations follows the continuous rise of the peso against the US dollar even after the 100-basis point reduction in policy rates. BSP Governor Amando Tetangco stated that pre-termination of NDFs are no longer allowed.

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Moreover, the BSP has limited foreign banks’ NDF exposure to 100% of their capital, and local banks’ NDF exposure to 20% of their capital. All banks will be given two months to comply with the new regulations or else they might as well spend time on sanctuary furniture and hope for a better economy.

Local bond yields rose today as market players awaited the announcement of the 1st quarter debt schedule. In general, yields rose by an average of 5.42 basis points, led by the belly of the curve, which soared 12 basis points.

The Philippine peso declined the most in three weeks after the BSP announced more measures to temper its rapid appreciation. The local currency shed 9 centavos to close at 41.160.

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