TDF yields are up this week

Published December 1, 2021, 4:07 PM

by Lee C. Chipongian

There was a slight undersubscription in the central bank’s auction of the two-tenor term deposit facility (TDF) this week but yields went up, said Bangko Sentral ng Pilipinas (BSP) Deputy Governor Francisco G. Dakila Jr.

BSP Deputy Governor Francisco G. Dakila Jr.

The TDF attracted P467.82 billion tenders, lower compared to the previous Wednesday’s P614.31 billion. The volume is also lower this week at P480 billion versus P500 billion last Nov. 24.

The 7/8-day TDF, still offered at P180 billion, received P181.14 billion, barely above the offer. This was lower compared to last week’s P258.25 billion bids. The average interest rate increased to 1.7599 percent from 1.7329 percent. The bid coverage ratio fell to 1.0063 from 1.4347.

The 14-day tenor was offered lower this week at P300 billion from P320 billion last Nov. 24. Bids were also lower at P286.68 billion and undersubscribed based on the auctioned volume. Last week, the two-week TDF received P356.06 billion tenders.

On Wednesday, the yield for the 14-day TDF rose to 1.8226 percent from 1.7795 percent last week. The bid coverage ratio dropped to 0.9556 from 1.1127.

“The 8-day TDF was slightly oversubscribed, receiving bids 1.01x the offer volume. Meanwhile, the 14-day TDF was slightly undersubscribed, with bids about 0.96x the offer volume,” said Dakila.

As for the weighted average interest rates, the 7/8-day TDF rate rose by 2.704 basis points (bps) while the 14-day rate was higher by 4.313 bps.

“The yields accepted in the 8-day tenor shifted slightly lower but widened considerably to a range of 1.7100-2.1900 percent. Meanwhile, that for the 14-day tenor shifted higher and widened to a range of 1.7450-2.1900 percent,” said Dakila.

The BSP official said the results of the auction “continue to reflect normal market conditions”.

“(The auction was) supported by ample liquidity in the financial system, amid the ongoing issuance of the Retail Treasury Bonds which will be settled (on Dec. 2),” said Dakila.

The TDF is the central bank’s key liquidity absorption facility. In previous years when the BSP was unable to issue its own securities, the TDF was siphoning off a large chunk of the financial system’s structural liquidity surplus to bring market rates closer to the benchmark rate.

In September last year, the BSP finally launched its securities facility but the TDF was still withdrawing the bigger portion of excess liquidity. The BSP bills are auctioned every Friday.