TDF yields drop as auction attracts P360-billion tenders

Published June 17, 2020, 12:00 AM

by manilabulletin_admin

By Lee C. Chipongian

The central bank’s term deposit facility (TDF) auction is still oversubscribed with P360.02 billion bids against offer of P150 billion, while the average rate of the two tenors offered were down this week.

Bangko Sentral ng Pilipinas (BSP) logo

Based on the Bangko Sentral ng Pilipinas (BSP) data, the 7-day TDF which was offered at P120 billion same as last week, attracted tenders worth P268.44 billion. This was lower compared to June 10’s P284.13 billion.

The 7-day TDF’s average rate dropped to 2.2505 percent from 2.2507 percent previously.

The newly offered 14-day TDF, on its second week now, received P91.58 billion bids against offer of P30 billion. This week’s volume is more than P20 billion last Wednesday, it’s returning volume after 11 weeks of suspension.

The 14-day tenor’s average rate was also lower this week at 2.2512 percent from 2.2520 percent last June 10.

Only the 28-day TDF is suspended, it was last bid on March 18.

BSP Governor Benjamin E. Diokno has said that the BSP’s decision to temporarily suspend or reduce TDF volume is part of liquidity management measures.

The TDF is BSP’s key liquidity absorption facility while it is preparing to launch the sale of its debt instruments which was supposed to be in the third quarter this year, but moved to sometime in the second half of 2020.

The BSP said last week that it will continue to assess the liquidity and market conditions and that it will gradually reintroduce volume, including the return of the 28-day TDF, when there is demand for it.

On Monday, Diokno said the stabilization of liquidity conditions continue to give the Monetary Board the space to make changes to its monetary operations and provide “better guidance to short-term market interest rates.”

Domestic liquidity expanded by 16.2 percent in April to P13.6 trillion, outpacing the growth in March of 13.3 percent.

The BSP’s liquidity-enhancing measures as part of COVID-19 response, have added about P1 trillion in fresh funds for the banking system. Most of this new liquidity found their way back to the BSP’s open market operations, and some to purchase government securities.