TDF yields end mixed; still oversubscribed

Published July 28, 2021, 5:39 PM

by Lee C. Chipongian

The central bank’s weekly auction of term deposit facility (TDF) attracted mixed yields, and while still oversubscribed, the bids were subdued compared to the previous Wednesday.

Bangko Sentral ng Pilipinas (BSP) Deputy Governor Francisco G. Dakila Jr. said they offered a higher volume this week of P570 billion from P560 billion last July 21.

“The auction was oversubscribed as bids received in the 7-day and 14-day TDF were 1.07x and 1.08x their respective volume offers. Total tenders reached P613.27 billion,” said Dakila.

The BSP official also noted that the weighted average interest rate (WAIR) for the 7-day TDF increased by 1.622 basis points (bps) to 1.7154 percent while the 14-day WAIR declined by 1.679 bps to 1.7486 percent.

“The yields accepted in the 7-day TDF remained low but widened to a range of 1.650-2.050 percent. Meanwhile, the range of yields accepted in the 14-day TDF shifted slightly lower from last week at 1.720-1.770 percent,” said Dakila.

The 7-day TDF was offered higher at P170 billion from P160 billion last week. Bids reached P181.37 billion, lower compared to the previous P230.57 billion. The bid coverage ratio dropped to 1.0669 from 1.4411. The yield of 1.7154 percent was higher than last week’s 1.6992 percent.

The 14-day tenor has the same volume of P400 billion. Tenders, while still oversubribed, were lower at P431.89 billion compared to last week’s P511.24 billion, resulting to a decline in bid coverage ratio of 1.0797 versus the previous 1.7654. The average rate decreased to 1.7486 percent from 1.7654 percent.

The TDF was first offered in June 2016, part of the interest rate corridor system that was adopted beginning that year. It used to carry a longer-dated 28-day tenor, which the BSP has migrated to its securities facility last October 2020. Both the TDF and the BSP bills are BSP’s primary liquidity management tools to help control inflation.