TDF yields fell this week

Published June 23, 2021, 5:50 PM

by Lee C. Chipongian

The Bangko Sentral ng Pilipinas (BSP) auction of term deposit facility (TDF) this week attracted lower average rates ahead of the BSP’s monetary policy meeting on Thursday (June 24).

The BSP offered lower TDF volumes this week of P520 billion from the previous week’s P530 billion. The total tenders reached P645.34 billion, lower than June 16’s P655.83 billion.

“The BSP adjusted downward the TDF offer volume (and) both tenors were oversubscribed with the 7-day and 14-day TDF receiving tenders 1.58x and 1.12x higher than their respective offer volume,” said BSP Deputy Governor Francisco Dakila Jr.

The 7-day TDF, offered at P140 billion, received P220.94 billion bids. Its yield was down to 1.7376 percent from 1.7464 percent. The bid coverage ratio for this week was up at 1.5781 from 1.5163.

The 14-day tenor, in the meantime, had a lower offer of P380 billion from P390 billion last June 16. Bids amounted to P424.40 billion versus P443.55 billion. The yield fell to 1.8085 percent from 1.8118 percent. The bid coverage ratio also slipped to 1.1169 from 1.373.

“The results of the TDF auction show continued market participants’ interest on the BSP’s deposit facilities amid normal market condition as financial system liquidity remains ample,” said Dakila.

The BSP’s Monetary Board is expected to keep its key policy rate steady when they meet Thursday this week.

ING Bank economist Nicholas Mapa said BSP Governor Benjamin E. Diokno will probably “stick to script” and is expected to “signal an extended pause in terms of the policy rate.”

“(Governor) Diokno is currently navigating an extended inflation breach (4.4 percent year-to-date) while the Philippine economy slowly recovers from the 9.6 percent drop in GDP in 2020,” said Mapa. “With inflation pressures dissipating, we do expect Diokno to reiterate the need for his current accommodative stance as the economic rebound appears weighed down by mobility curbs and restrictions as new COVID-19 infections have yet to convincingly fall. With almost all market participants expecting a pause from Diokno tomorrow (June 24), the greater focus for the policy meeting may actually be on what Diokno doesn’t mention,” he added.

The BSP’s key rate has remained at two percent since end-2020.