The central bank’s auction of term deposit facility (TDF) is still attracting lower yields with a higher volume this week of P510 billion versus the previous offer of P470 billion.
The TDF sustained its strong demand from the market and was oversubscribed with P703.30 billion in total bids. This was however lower compared to last week’s P735.27 billion, based on Bangko Sentral ng Pilipinas (BSP) data.
The 7-day TDF was offered higher on Wednesday, Jan. 19 at P220 billion from P200 billion last week. Total tenders reached P253.60 billion, lower than Jan. 12’s P299.46 billion. The average rate for the 7-day tenor fell to 1.7128 percent from 1.7232 percent.
The 14-day TDF also had a higher offer of P290 billion compared to P270 billion last Jan. 12. Bids amounted to P449.68 billion, up from P435.81 billion previously. The yield was down to 1.7259 percent from 1.7487 percent.
The TDF was first introduced in 2016 when the BSP shifted to the interest rate corridor system to bring market rates closer to the BSP policy rate.
Last December, the BSP’s Monetary Board expanded the list of eligible participants for its market operations to strengthen the “effectiveness of its market-based instruments for monetary operations” which includes its securities facility, besides the TDF.
The BSP’s market operations now includes digital banks as eligible participants starting Dec. 10 last year.
The country’s first six digital banks will have access to the reverse repurchase or RRP facility, overnight lending facility or OLF, overnight deposit facility or ODF, the TDF and BSP securities facility for their day-to-day liquidity management needs.
The expanded list of eligible participants supports the implementation of monetary policy as it will help the BSP better manage liquidity in the financial system. Its open market operations enhance monetary policy transmission and improves the money market through better price discovery, said the BSP.