TDF rates mixed this week

Published September 1, 2021, 5:27 PM

by Lee C. Chipongian

Demand for term deposit facility (TDF) were mixed on Wednesday with total bids of P618.29 billion against offer of P570 billion.

The Bangko Sentral ng Pilipinas (BSP) said demand for the 7-day TDF increased while its yield fell, while the 14-day tenor’s average rate went up but its tenders were lower compared to the previous auction.

Overall, total bids reached P618.29 billion versus P593.59 billion. The offer size this week is P570 billion, up from P550 billion last week.

The 7-day TDF, still offered at P150 billion, received P232.83 billion bids, up from P169.14 billion last August 25. The average rate dropped to 1.7121 percent from 1.7207 percent. The bid coverage ratio increased to 1.5522 from 1.1276.

The 14-day TDF has a higher offer this week of P420 billion from P400 billion last week. The tenor was undersubscribed, attracting only P385.46 billion. Bids were down from P424.45 billion last week. Yield rose to 1.7381 percent from 1.7167 percent. The bid coverage ratio dropped to 0.9178 from 1.0611.

BSP Deputy Governor Francisco G. Dakila Jr. said the 7-day TDF was oversubscribed with bids higher by 1.55x the offered amount.

The 14-day TDF was undersubscribed by 0.92x versus the offering. “The undersubscription in the 14-day TDF reflects a shift in market participants’ preferences toward the shorter tenor,” said Dakila.

The accepted yields this week for both tenors remained low, Dakila also noted. The 7-day TDF narrowed further to a range of 1.6750-1.7393 percent and the 14-day TDF widening to a range of 1.7000-2.2100 percent.

“The results of the auction remain consistent with normal market conditions amid ample financial system liquidity as seen in the sustained overall demand for the TDF,” said Dakila.

The TDF, introduced in 2016, is one of the BSP’s primary liquidity-mopping up tool to bring the policy rate closer to market rates.