TDF yields are mixed; bids are lower

Published August 25, 2021, 6:42 PM

by Lee C. Chipongian

The Bangko Sentral ng Pilipinas’ (BSP) auction of term deposit facility (TDF) was still oversubscribed on Wednesday but lower than last week, while average interest rates were mixed.

Total tenders reached P593.59 billion against offer of P550 billion. Bids were lower than the previous week’s P677 billion.

BSP Deputy Governor Francisco G. Dakila Jr. said both TDF tenors were oversubscribed by 1.13x for the 7-day and 1.06x for 14-day.

“The yields accepted in the 7-day tenor remained low but widened to a range of 1.6750-2.0120 percent while the yields accepted in the 14-day tenor remained generally unchanged at a range of 1.6995-1.7500 percent,” said Dakila.

The BSP executive said auction results “remain in line with normal market conditions (and the) rise in the WAIR of the shorter tenor could be due in part to month-end liquidity requirements.”

“Nevertheless, financial system liquidity remains ample as seen in the sustained strong demand for the 14-day TDF,” he added.

The 7-day TDF, still offered at P150 billion, received P169.14 billion bids compared to P249.89 billion last August 18. Its yield rose to 1.7207 percent from 1.7113 percent. The bid coverage ratio dropped to to 1.1276 from 1.6659.

The 14-day tenor also have the same offer of P400 billion as last week. Bids amounted to P424.45 billion, slightly lower than P427.11 billion previously. The bid coverage ratio dipped to 1.0611 from 1.0678.

The TDF is one of the BSP’s key liquidity-mopping up tool to bring the policy rate closer to market rates.

Last year, the first COVID-19 pandemic year, the BSP siphoned off P2 trillion of excess liquidity from the financial market. It is the same amount of liquidity it has infused to calm the markets during the pandemic.