More bids for TDF; mixed yields

Published August 4, 2021, 4:53 PM

by Lee C. Chipongian

The central bank’s auction of term deposit facility (TDF) drew mixed yields but while the volume is lower this week, it attracted higher tenders as the liquidity conditions are perceived to be normal despite the return of stricter lockdown measures.

Bangko Sentral ng Pilipinas (BSP) Deputy Governor Francisco G. Dakila Jr. said the TDF results “are in line with what was observed in the primary GS (government securities) market.”

“The increase in the 7-day rate may also be attributed to the TDF auction results last week. Nevertheless, despite the re-imposition of stricter quarantine measures on 6-20 August 2021, market conditions remain normal amid continued ample financial liquidity,” Dakila added.

The two-tenor TDF, offered at P560 billion which was lower than P570 billion last July 28, received P643.58 billion bids, up from P613.26 billion previously.

Dakila continue to note strong TDF demand both for the 7-day and 14-day tenors. These were oversubscribed with bids of 1.16x more than its offer for the 7-day and 1.14x for the 14-day.

The 7-day TDF, offered at P160 billion versus P170 billion last week, received P185.59 billion bids compared to P181.37 billion previously. Its weighted average interest rate (WAIR) was 1.7375 percent, up from 1.7154 percent last July 28. With the higher tenders, the bid coverage ratio increased to 1.1600 from 1.0669.

The 14-day TDF which had the same offer of P400 billion, attracted P457.98 billion this week, more than the P431.89 billion previously. The WAIR slipped to 1.7448 percent from 1.7486 percent. The bid coverage ratio was 1.1450, up from 1.0797 last week.

The 7-day yield rose by 2.217 basis points (bps) to 1.7375 percent but fell to 0.383 bp to 1.7448 percent for the 14-day,

“The yields accepted in the 7-day TDF shifted slightly higher but narrowed to a range of 1.675-2.020 percent while that for the 14-day TDF remained generally unchanged at a range of 1.719-1.759 percent,” said Dakila.

The TDF before October 2020 was offering a longer-dated 28-day tenor, which the BSP has since migrated to its securities facility after introducing the 28-day BSP bills last year.

The TDF is BSP’s key liquidity mopping up facility since 2016. The auction has remained steady around current levels, as dictated by market demand. The auction size is determined by the BSP’s weekly liquidity forecasters