BSP cuts TDF volume next week

Published April 19, 2018, 12:00 AM

by manilabulletin_admin

By Lee Chipongian

The Bangko Sentral ng Pilipinas (BSP) will reduce the term deposit facility (TDF) auction size next week to P90 billion from P110 billion in anticipation of banks’ tendency to hold on to their cash ahead of a long weekend.

A logo of the Bangko Sentral ng Pilipinas is seen at their headquarters in Manila, (REUTERS/Romeo Ranoco / MANILA BULLETIN)

May 1, Tuesday next week is Labor Day and a regular holiday, following a weekend.

BSP Governor Nestor A. Espenilla Jr. on Thursday said they will return the volume when demand resumes after the coming Wednesday’s (April 25) TDF auction.

Espenilla said it is a “temporary cut (again) because of upcoming holidays. Then, back to usual.”

On April 25, the 7-day TDF will be offered at P40 billion, down P10 billion from P50 billion, while the 14-day tenor is also reduced to P30 billion from P40 billion. The 28-day TDF will keep its P20 billion volume.

On Wednesday, the TDF auction had lower bids of P112 billion from the previous week’s P133.039 billion. The weighted average rates were mixed, with the 7-day and 14-day registering increases while the longer-dated TDF’s yield has decreased amid lower bids.

The last time the TDF volume was at P90 billion was the auction ahead of Holy Week break.

The BSP has maintained the P110 billion TDF volume since February 21.

The TDF’s auction size is reviewed and determined by liquidity forecasts. Its highest offer volume so far was P180 billion.

The TDF is part of the BSP’s set of tools to manage the financial system’s money supply. It was introduced on June 3, 2016 with an initial volume of P30 billion.