TDF yields mixed but bids drop

Published February 5, 2020, 12:00 AM

by manilabulletin_admin

By Lee C. Chipongian

The central bank’s term deposit facility (TDF) closed mixed during yesterday’s auction and while still more than offer of ₱200 billion, tenders were lower compared to last week.

The three-tenor TDF attracted tenders worth ₱207.80 billion which was lower than January 29’s ₱262.97 billion. Yields were mixed ahead of the Bangko Sentral ng Pilipinas’ Monetary Board’s policy meeting today (Thursday), its first for 2020.

During Wednesday’s auction, the 7-day tenor, still offered at ₱80 billion, received lower bids of ₱66.75 billion compared to the previous week’s ₱105.23 billion. The average rate went up a bit to 4.0240 percent from 4.0233 percent.

The 14-day or mid-tenor, still unchanged at ₱60-billion volume, had ₱64.81 billion in bids compared to ₱94.08 billion last week. The average rate dropped to 4.0197 percent from 4.0397 percent.

The longer-dated 28-day TDF had a higher tender volume this week of ₱76.24 billion from ₱63.66 billion last January 29, and exceeding the offer of ₱60 billion. Yields dipped to 4.0419 percent from 4.0741 percent.

BSP officials said they continue to correctly assess demand volume for the TDF and that results are within their expectations.

The BSP raised the TDF offer to ₱200 billion for the first time on January 22, the highest offered volume since the facility was introduced in June 2016.

There are extra liquidity in the financial system after the BSP reduced banks’ reserve requirement ratio (RRR) by 400 bps last year, and releasing more than ₱400 billion of fresh funds. Bulk of these funds found their way back to the BSP’s TDF. However, the BSP also expected this movement.

Diokno said that similar to any policy rate action, changes to the RRR have a lag time of up 12 months. He expects funds to be channelled as bank lending after some time and he is hoping that a significant portion of these funds will go to infra-related and development funding, especially in provinces outside of Metro Manila.