The central bank’s auction of term deposit facility (TDF) continued to be oversubscribed but yields were mixed ahead of Thursday’s Monetary Board policy meeting.
The Bangko Sentral ng Pilipinas (BSP) decreased the offered volume this week by P10 billion to P550 billion. The two-tenor TDF was still oversubscribed at P673.55 billion, higher than the previous week’s P639.35 billion.
The 7-day TDF, offered at P150 billion which was lower than P160 billion last week, received P200.54 billion bids, higher than August 4’s P181.37 billion. The average interest rate was steady at 1.7376 percent from 1.7375 percent. The bid coverage ratio was up at 1.3370 compared to 1.1600 last week.
The 14-day tenor which has the same volume of P400 billion, attracted tenders amounting to P473 billion, also higher than the previous week’s P457.98 billion. The yield dropped to 1.7389 percent from 1.7448 percent previously. The bid coverage ratio also increased to 1.1825 from 1.1450.
BSP Deputy Governor Francisco G. Dakila Jr. said the TDF continue to receive higher bids with the 7-day tenor about 1.34x oversubscribed, while the 14-day tenor is 1.18x more than its offer.
“The weighted average interest rate (WAIR) for the 7-day TDF remained generally unchanged at 1.7376 percent (from last week’s 1.7375 percent) while that for the 14-day TDF declined slightly by 0.583 bp to 1.7389 percent. The accepted yields in both tenors remained low but narrowed further to a range of 1.6750-1.8500 percent in the 7-day tenor and 1.7100-1.7495 percent in the 14-day tenor,” said Dakila.
He reiterated that auction results were as expected and it showed strong demand for the BSP’s TDF “amid sustained ample liquidity in the financial system.”
The TDF is one of, if not the primary, liquidity absorption facility of the BSP.
In 2016, the BSP adopted the interest rate corridor (IRC) system to guide short-term market rates towards the BSP policy interest rate, and the TDF auction is part of the IRC framework.
The BSP's Monetary Board will meet Thursday (August 12) for its next policy meeting. The BSP policy rate has been kept at a low two percent since November 2020.