TDF rates fell; bids mixed

Published May 12, 2021, 6:12 PM

by Lee C. Chipongian

The term deposit facility (TDF) auction on Wednesday attracted mixed tenders while yields continued to drop.

Based on Bangko Sentral ng Pilipinas (BSP) data, the 7-day TDF was still offered at P150 billion, received P160.20 billion bids, higher than P157.38 billion last week. Its average rate fell to 1.7253 percent versus 1.7314 percent last May 5. Its bid coverage ratio also dropped to 1.0680 from 1.1824.

The 14-day TDF also has a higher offer of P370 billion from P360 billion last week. Tenders received amounted to P368.45 billion which was below the offer volume. This was also lower than last week’s P425.68 billion.

The 14-day tenor’s average rate decreased to 1.7392 percent from 1.7486 percent. Its bid coverage ratio dipped to 0.9958, indicating lower demand compared to the previous week’s 1.0492.

“The marginal undersubscription in the longer tenor could be partially attributed to market uncertainty coming from the release of the lower-than-expected first quarter 2021 GDP growth data yesterday (May 11, Tuesday) and anticipation of the BSP’s policy announcement today (May 12, Wednesday). Looking ahead, the BSP’s monetary operations will continue to be guided by its latest assessment of prevailing liquidity conditions and market developments,” according to BSP Deputy Governor Francisco G. Dakila Jr.

Dakila noted of sustained demand for the TDF. “The BSP offered a higher TDF volume of P520 billion from last week’s P510 billion (and) the 7-day tenor was oversubscribed, receiving 1.068x bids over the offer volume, while the 14-day tenor was almost fully subscribed, receiving 0.996x bids,” he noted. Total tenders amounted to P528.65 billion which he said was “generally consistent with the BSP’s expectations.”

In the meantime, the 7-day TDF rate decreased by 0.617 basis points (bps) while the 14-day fell by 0.945 bps. Dakila said the range of accepted yields in the 7-day tenor remained low and narrow at 1.700-1.745 percent. For the 14-day tenor, he said this “shifted slightly lower but widened” to 1.680-2.200 percent.

“The results of the TDF auction continue to show that market conditions are normal amid sustained ample liquidity in the financial system,” said Dakila.

The TDF, introduced in 2016, is one of BSP’s primary liquidity absorption tool.