BSP’s TDF sustains strong demand; yields rise


The average yields of the central bank’s term deposit facility (TDF) increased this week amid sustained demand and banks’ oversubscribed tenders.

The TDF volume remained at P600 billion on banks’ divided attention with the sale of Bureau of the Treasury’s bonds.  Bids were lower this week at P695.227 billion versus P739.382 billion last February 17, based on Bangko Sentral ng Pilipinas (BSP) data.

The 7-day TDF, still offered at P200 billion, attracted P283.972 billion tenders, higher than the previous week’s P258.927 billion. The average rate increased to 1.6342 percent from 1.6310 percent.

The 14-day tenor was also bidded to a higher yield of 1.7055 percent from 1.6443 percent. Offered at P400 billion, it received tenders worth P411.255 billion compared to P480.455 billion last week.

According to BSP Deputy Governor Francisco G. Dakila Jr., the BSP kept the TDF volume for both the 7-day and 14-day tenors unchanged at P200 billion and P400 billion, respectively, in view of the ongoing Retail Treasury Bond (RTB) offering of the government.

“Both tenors remained oversubscribed, receiving tenders 1.42x the offering in the 7-day TDF and 1.03x the volume in the 14-day TDF,” noted Dakila.

He also said that the weighted average interest rates for both tenors continued to increase from last week. “There was a marginal increase by 0.314 bp (basis point) in the 7-day TDF to 1.6342 percent and a 6.116-bp uptick in the 14-day TDF to 1.7055 percent,” he said. The range of accepted yields remained low and narrower in the 7-day tenor, at 1.590-1.656 percent, but wider in the 14-day tenor, at 1.600-2.000 percent, he added.

“With ample liquidity in the financial system, market participants continue to search for yield as indicated by the strong demand for the BSP’s deposit facilities amid the RTB offering,” said Dakila.

The TDF is the BSP’s key liquidity absorption facility. Before its issuance of its own debt instruments, the TDF is its main liquidity management tool.

“The TDF is tasked to withdraw a large part of the structural liquidity surplus from the financial system to bring market rates closer to the BSP policy rate,” said the BSP.