TDF auction fetch higher rates

By Lee C. Chipongian

Nestor A. Espenilla Jr. (Bloomberg) Nestor A. Espenilla Jr. (Bloomberg)



The average rates of the central bank’s term deposit facility (TDF) is still rising while demand remains steady.

Bangko Sentral ng Pilipinas (BSP) Governor Nestor A. Espenilla Jr. said TDF rates’ increasing trend is what they expect to happen after adjusting its own key rate by a cumulative 100 basis points.

The increase in TDF average rates, he said, is “reasonable under the circumstances”, it is encouraged, and shows that the monetary policy framework under the interest rate corridor is working.

Espenilla said they are also comfortable with the current auction volume of P100 billion and have no intention to adjust the size at the moment. The TDF volume of P100 billion has been unchanged since June 6 this year. It is broken down as P40 billion each for the 7-day and 14-day and P20 billion for the 28-day.

Overall bids during Wednesday’s auction amounted to P116.39 billion, higher than last week’s P106.74 billion.

Average rates were higher across all tenors. Tenders for the 7-day amounted to P43.81 billion, more than last week’s P42.17 billion. The rate was also higher at 4.2878 percent versus 4.2069 percent.

The 14-day TDF received tenders of P49.25 billion, also higher than last week’s P37.89 billion. The rate increased to 4.3892 percent from 4.2976 percent.

The 28-day tenor, in the meantime, had bids of P23.33 billion which was lower than P26.68 billion on August 22. Yields climbed to 4.4105 percent from 4.3590 percent.

The BSP adopted the IRC system two years ago to guide short-term market rates towards the BSP policy interest rate.

The TDF’s auction size is reviewed and determined by liquidity forecasts. Its lowest auction size was P80 billion, the highest was P180 billion.