TDF rates end mixed at auction

Published January 23, 2019, 12:00 AM

by manilabulletin_admin

By Lee C. Chipongian

The central bank’s term deposit facility (TDF) had mixed rates on Wednesday and at P60.83 billion, tenders were oversubscribed against offer of P50 billion.

Bangko Sentral ng Pilipinas (BSP) logo

Based on Bangko Sentral ng Pilipinas (BSP) data, the 7-days, 14-days and 28-days TDF were oversubscribed, particularly the shorter-dated tenor.

BSP Deputy Governor Diwa C. Guinigundo said that there is “clear ample liquidity in the system” after recent holidays.

“But banks wanted to go short given the BTr’s (Bureau of the Treasury) tap facility so they swarmed the 7-day TDF,” he noted.

Guinigundo expects demand to continue in the 7-day tenor and with “more stiff competition in the shortest tenor” he said “interest rates have levelled down.”

As for the 14-days and 28-days TDF, the BSP official said “banks’ investment horizons are much shorter so given the ample but more limited liquidity, interest rates trended up.”

“I would expect the same trend next week,” he added.

The 7-days, still offered at P20 billion, had total bids of P30.15 billion, a little bit more than last week’s P29.74 billion. Average rate was at 5.0447 percent from 5.0630 percent in the previous Wednesday.

The 14-day TDF attracted P20.16 billion in total tenders, higher compared to last week’s P17.32 billion. The tenor has an offer size of P20 billion. Yields were up at 5.1437 percent from January 16’s rate of 5.1290 percent.

The 28-days, in the meantime, also exceeded its offer of P10 billion at P10.51 billion. This is however lower than last week’s P12.72 billion. Average rate rose to 5.1547 percent from 5.1339 percent.

The auction-based TDF, one of BSP’s open market operation, is a liquidity-absorbing tool. Mirroring the higher central bank key rate, the TDF rates have been on the rise following the BSP’s combined 175 basis points rate hike in 2018.

The BSP adopted the interest rate corridor system in mid-2016. The IRC is a system for guiding short-term market rates towards the BSP policy interest rate which is the overnight reverse repurchase rate.