TDF yields up on mixed bids

Published September 29, 2021, 5:55 PM

by Lee C. Chipongian

The central bank’s auction of term deposit facility (TDF) yielded higher interest rates on Wednesday but the tenders were mixed with an undersubscribed 7-day TDF.

Bangko Sentral ng Pilipinas (BSP) Deputy Governor Francisco G. Dakila Jr. still described the auction as having sustained overall demand. The offer volume this week is higher at P530 billion from P520 billion last September 22. The combined bids totaled P540.61 billion for the two tenors.

“The TDF auction results are in line with current market conditions amid sustained ample liquidity in the financial system,” said Dakila.

BSP Deputy Governor Francisco G. Dakila Jr.

The 7-day TDF, offered more this week at P170 billion or up by P10 billion, only received P160.05 billion tenders. This was significantly lower than the previous week’s P217.42 billion bids. The bid coverage ratio fell to 0.9415 from 1.3589. The average interest rate, in the meantime, increased to 1.7371 percent versus 1.7046 percent last week.

The volume for the 14-day TDF was unchanged at P360 billion. It was still oversubscribed at P380.56 billion but lower compared to September 22’s P402.80 billion. The bid coverage ratio also dropped to 1.0571 from 1.1189. The yield was up at 1.7443 percent from 1.7439 percent.

“There was a slight undersubscription in the 7-day TDF, at 0.94x the offering, while the 14-day TDF remained oversubscribed with bids reaching 1.06x the offering,” noted Dakila.

He also said that the average interest rate for both tenors continued to increase with the 7-day rate up by 3.251 basis points week-on-week and the 14-day rate was also up by 0.044 basis point.

“The yields accepted remained low but widened to a range of 1.6800-2.2000 percent for the 7-day tenor and 1.7095-1.8800 percent for the 14-day tenor,” said Dakila.

The TDF is BSP’s main liquidity-mopping tool. In a recent central bank report on second quarter data. as of end-June the BSP has absorbed P2.1 trillion of liquidity and bulk of this liquidity was placed in the TDF.

The TDF absorbed about 43 percent of the combined outstanding amount of liquidity absorbed through the BSP liquidity facilities, said the BSP. The other 23.7 percent were placements in the overnight deposit facility while 18.9 percent were in the the securities facility. Another 14.4 percent of absorbed liquidity were in the reverse repurchase operation.

The BSP noted that the average weekly total offer volume was lower at about P509.2 billion in the second quarter compared to P561.5 billion in the first quarter this year.