BSP’s TDF auction yields mixed results

Published July 25, 2018, 12:00 AM

by manilabulletin_admin

By Lee C. Chipongian

The Bangko Sentral ng Pilipinas’ (BSP) term deposit facility (TDF) closed mixed yesterday with tenders of P124.49 billion, more than offer of P100 billion but lower compared to the previous week’s P129 billion.

Bangko Sentral ng Pilipinas (BSP) logo

The 7 days TDF received bids worth P47.436 billion, slightly more than last week’s P47.372 billion. The average rate has dropped to 3.7494 percent from 3.7586 percent. This tenor has an offer size of P40 billion.

Both the 14 days and 28 days had lower bids while yields were mixed.

The mid-tenor had bids amounting to P54.352 billion against offer of P40 billion. It was lower compared to last Wednesday’s P57.485 billion. The average rate is lower at 3.9084 percent compared to the previous week’s 3.9220 percent.

The 28 days, in the meantime, had tenders of P22.711 billion from P23.982 billion. The average rate increased to 3.9471 percent from 3.9416 percent. The offer size remains at P20 billion.

The TDF, adopted with the interest rate corridor (IRC) in 2016, is one of the BSP’s monetary policy tool to manage domestic liquidity. The TDF has helped the BSP to guide short-term market rates closer to the benchmark rates and the auction-based open market operation has also allowed the BSP to reduce the reserve requirement ratio (RRR) by 200 basis points this year, so far.

BSP Governor Nestor A. Espenilla Jr. has often repeated that the BSP’s objective is to reduce RRR in a timely manner. The recent cuts has released about P180 billion into the financial system which was absorbed by the TDF.

Espenilla has assured the market that they have enough market-based tools to neutralize the impact of more RRR reductions until it’s beaten down to single-digit levels – possibly by 2023 – from its current 18 percent.