TDF rates still down

Published April 28, 2021, 5:10 AM

by Lee C. Chipongian

Yields of the central bank’s term deposit facility (TDF) continue to decline on Wednesday while tenders are still more than offer.

Based on Bangko Sentral ng Pilipinas (BSP) data, the 7-day TDF received P174.27 billion tenders versus offer of P140 billion. It is the same volume from last week while bids were slightly lower than April 21’s P179.14 billion.

The 14-day TDF also kept its P350 billion offer this week. The tenor attracted P372.30 billion bids which was lower than the previous P403.63 billion.

The 7-day average rate fell to 1.7411 percent from last week’s 1.7541 percent. The two-week TDF also had a lower average rate of 1.7601 percent from 1.7860 percent.

Overall, tenders amounted to P546.57 billion against an offer volume of P490 billion. This was lower than P582.77 billion bids last April 21.

Last year, the BSP siphoned off P2 trillion of excess liquidity from the financial market. It is the same amount of liquidity it has infused to calm the markets during the first year of the pandemic. The central bank reduced the benchmark rates and banks’ reserve requirements by 200 basis points each.

The BSP is also the biggest buyer of government securities in the secondary market as a form of debt monetization and for funding government requirements. The central bank also advanced renewable loans to the National Government — under a repurchase agreement — as part of its anti-COVID-19 response.

The BSP’s overnight deposit facility was the main catch basin for the excess liquidity and it absorbed P1.14 trillion of the P2 trillion or 57 percent of the total. The TDF only accounted for 16.3 percent or P326 billion while its reverse repurchase facility absorbed 15.5 percent or P310 billion last year.

The TDF is one of the BSP’s key liquidity-mopping up tool to bring the policy rate closer to market rates.