TDF rates fell; bids also down this week

Published January 14, 2021, 5:30 AM

by Lee C. Chipongian

The average interest rates of the central bank’s term deposit facility (TDF) continue to drop this week as tenders also declined by P140.68 billion.

The TDF, offered higher at P550 billion versus last week’s P530 billion, received tenders P726.62 billion which was lower compared to January 6’s P867.29 billion, based on Bangko Sentral ng Pilipinas (BSP) data.

“The results in (Wednesday’s) TDF auction continue to reflect ample liquidity in the financial system. Looking ahead, the BSP’s monetary operations will remain guided by its assessment of liquidity conditions and market developments,” according to BSP Deputy Governor Francisco G. Dakila Jr.

Dakila noted the increased TDF offer that they allocated between the 7-day and 14-day tenors or each P10 billion higher from previous auction.

“Both tenors were oversubscribed, receiving bids 1.53x and 1.20x the volume in the 7-day and 14-day TDF, respectively,” he said.

Dakila also noted that the TDF weighted average yields continued to decrease with the 7-day tenor dropping by 2.645 basis points (bps) and the 14-day TDF declining by 1.459 bps. “The accepted range of yields were likewise lower, ranging from 1.600-1.670 percent for the 7-day tenor and 1.600-1.700 percent for the 14-day tenor,” he added.

The 7-day TDF, offered at P200 billion, attracted P305.27 billion tenders versus P380.92 billion last week. Its average rate dipped to 1.6470 percent from 1.6735 percent last January 6.

The 14-day TDF was offered at P350 billion. It received P421.34 billion tenders compared to P486.37 billion last week. The average yield also fell to 1.6673 percent from 1.6819 percent.

Last year, the BSP cut the policy rate by a total 200 bps or by two percent. The BSP has implemented a series of pandemic-induced aggressive policy rate cuts since February 2020 before the lockdown was declared in March.

The central bank also implemented liquidity-enhancing measures such as cutting the reserve requirements, cash advances to the National Government and buying domestic securities. These measures released almost P2 trillion in liquidity.