No 28-day offer; TDF auction still oversubscribed

Published October 15, 2020, 6:00 AM

by Lee C. Chipongian

The Bangko Sentral ng Pilipinas (BSP) dropped the 28-day tenor this week and shifted the volume to the two remaining term deposit facility (TDF).

During Wednesday’s TDF auction, the BSP offered P470 billion, down from P480 billion last week. Total bids reached P574.19 billion.

The 7-day TDF has more volume at P220 billion versus October 7’s P200 billion. It received P254.48 billion tenders, more than last week’s P233.94 billion. The average rate rose to 1.8466 percent from 1.8431 percent last week.

The 14-day tenor was offered at P250 billion, also higher than last week’s P220 billion. The TDF attracted P319.70 billion bids compared to P336.33 billion the previous Wednesday. The yield was down to 1.8426 percent from 1.8492 percent.

BSP Deputy Governor Francisco G. Dakila Jr. said the auction results continue to “reflect sustained high level of liquidity in the financial system” but did not give any other explanation for why the 28-day TDF is not offered this week, other than to comment that “there was no offering for the 28-day TDF.”

Dakila reiterated that BSP will review and “gradually recalibrate its monetary operations” as “guided by its assessment of market developments and liquidity conditions.”

For this week, he noted that “the two tenors were oversubscribed with tenders for the 7-day TDF reaching 1.16x and 14-day TDF at 1.28x their respective offer volumes. Total tenders amounted to P574.19 billion, consistent with the BSP’s expectations.”

The range of yields accepted were wider than in the previous week with the 7-day tenor at 1.800-1.900 percent and the 14-day tenor at 1.780-1.870 percent.

The central bank’s liquidity-enhancing measures, including advances to the National Government to “soften” COVID-19 impact to the economy, has reached P1.9 trillion as of the first week of October, about 9.6 percent of GDP.

The auction of the TDF, offered in 7-day, 14-day and 28-day tenors will continue to complement the securities facility.

BSP Governor Benjamin E. Diokno has said that the BSP has no intention of cancelling the TDF tenors in favor of its bills and bonds. He said that TDF will remain in the BSP toolkit and will be utilized to fine tune liquidity management, along with the reverse repurchase facility.

The volume for the 28-day BSP bill will be posted before its Friday auction. Since its September 18 initial issuance, the 28-day TDF and BSP securities mirror each other’s volume and yields.