BSP ups TDF volume; rates still down

Published May 6, 2021, 5:00 AM

by Lee C. Chipongian

The central bank’s term deposit facility (TDF) has a higher offered volume this week of P510 billion versus P490 billion on April 28, but yields were still down as banks await the decision of the Monetary Board’s policy meeting next Thursday.

Based on Bangko Sentral ng Pilipinas (BSP) numbers, total tenders on Wednesday reached P583.06 billion, higher than last week’s P546.57 billion.

The 7-day TDF was offered at P150 billion, P10 billion more than last week’s auction. It attracted P157.38 billion bids, lower than P174.27 billion previously. Bid coverage ratio was at 1.1824. The shorter tenor’s average interest rate fell to 1.7314 percent from 1.7411 percent last week.

The 14-day TDF also has a higher volume this week of P360 billion from P350 billion previously. Tenders totaled P425.68 billion, up from P372.30 billion last April 28. Bid coverage ratio was at 1.0492. Its yield, in the meantime, dropped to 1.7486 percent versus last week’s 1.7601 percent.

BSP Deputy Governor Francisco G. Dakila Jr. noted that both tenors continue to be oversubscribed, with the 7-day’s bids exceeding the volume by 1.05x, and 1.18x for the 14-day .

“The weighted average interest rates for both TDF tenors continued to decline from the previous week’s rates. The 7-day TDF rate decreased by 0.971 bp (basis points) to 1.7314 percent and the 14-day TDF rate fell by 1.150 bps to 1.7486 percent. The accepted yields remained low and within a relatively narrow range, with the 7-day rates at 1.700‑1.750 percent and the 14-day rates ranging 1.700-1.760 percent,” said Dakila.

The BSP official reiterated that results of the TDF auction continue to show that market conditions remain normal and there is hefty liquidity in the financial system.

The TDF is BSP’s key liquidity absorption tool, along with the BSP securities facility whose auction is held every Friday. 

The TDF was first introduced in June 2016 after the BSP shifted to the interest rate corridor system to help ensure that money market interest rates are within close range of the policy rate. The BSP’s key rate remains at two percent flat and analysts expect the Monetary Board to keep this rate for the rest of 2021.