Banks bid 14-day TDF rate higher

Published May 19, 2021, 5:21 PM

by Lee C. Chipongian

The Bangko Sentral ng Pilipinas’ (BSP) auction of term deposit facility (TDF) received more bids this week especially for the 14-day tenor, while yields were mixed.

The 14-day TDF, offered lower at P360 billion from P370 billion last May 12, attracted P408.12 billion tenders. This was higher compared to last week’s P368.45 billion which was below the offer.

The 14-day average interest rate rose to 1.7546 percent from 1.7392 percent last week while its bid coverage ratio increased to 1.1337 from 0.9958 indicating higher demand for the tenor.

The shorter 7-day TDF received P167.79 billion versus offer of P150 billion which was the same volume on May 12. Its yield slightly fell to 1.7230 percent from 1.7253 percent previously. Its bid coverage ratio stood at 1.1187 from 1.0680.

Wednesday’s TDF auction attracted total bids of P575.91 billion, up from last week’s P528.65 billion. The offer volume was lower at P510 billion from P520 billion previously.

The TDF is one of BSP’s primary liquidity absorption tool. As part of the interest rate corridor system, the TDF helps bring market rates closer to the BSP or policy rate. 

The Monetary Board has kept the key interest rate at two percent for the last three policy meetings in a row to support domestic demand as “risk aversion continues to hamper credit activity despite ample liquidity in the financial system.” 

The BSP’s interest rates on the overnight deposit and lending facilities are still at 1.5 percent and 2.5 percent, respectively.

The last time the BSP changed its monetary policy setting was November 19, 2020 when it cut the key rate by 25 basis points to two percent.