By Lee C. Chipongian
The central bank’s 7-day term deposit facility (TDF) fetched a lower interest rate of 2.9256 percent during yesterday’s weekly auction with banks swamping the lone tenor.
The Bangko Sentral ng Pilipinas (BSP) received tenders of P119.582 billion against offer and award of R40 billion. The bids were lower than the previous auction’s P125.564 billion.
BSP accepted yields ranged from 2.750 percent to 2.989 percent. The 2.9256 percent weighted rate is lower compared to the previous Wednesday’s 3.1391 percent.
Since it remains the only offered TDF since December 20, banks were bidding 3x more than offer.
BSP Deputy Governor Diwa C. Guinigundo has said that the BSP is giving banks time to normalize liquidity conditions before they again offer to the market the 28-day TDF which was temporarily removed due to months of undersubscription.
In the meantime, the central bank in consultation with banks, may start offering a new tenor this quarter. The 14-day TDF is being anticipated to be introduced by March.
The 28-day TDF, on the other hand, is expected to return to the market next month, or in mid-February.
But for next week’s auction, the BSP announced yesterday that it will still offer only 7-days at R40 billion.
The BSP’s liquidity forecasting tool is data-driven and Guinigundo earlier explained that based on their numbers, banks continue fund their lending activities, buy foreign exchange for imports, debt servicing and foreign investments. This has led to lower excess demand, hence the consistent undersubcriptions for the 28-days.
Guinigundo said banks prefer “very short-term instruments” such as the 7-days for flexibility in servicing clients’ requirements.