TDF rates mixed on sustained demand

Published January 26, 2022, 5:17 PM

by Lee C. Chipongian

The central bank’s auction of term deposit facility (TDF) had mixed yields this week while bids for the 7-day tenor only matched its offering.

Despite the lower tenders compared to the previous week, Bangko Sentral ng Pilipinas (BSP) Deputy Governor Francisco G. Dakila Jr. said the TDF still managed to show “sustained demand”.

BSP Deputy Governor Francisco G. Dakila Jr.

“The TDF auction results continue to show that liquidity in the financial system remains ample, with market preferences possibly shifting to longer tenors,” he said.

Total bids on Wednesday, Jan. 26, amounted to P651.56 billion versus P703.28 billion last week. The offer volume was higher at P550 billion from P510 billion on Jan. 19.

“There was full subscription in the 7-day TDF, with bid-to-cover ratio at 1.00, as well as oversubscription in the 14-day TDF, with bid-to-cover ratio at 1.33,” said Dakila.

He also noted that the weighted average interest rate (WAIR) for the 7-day TDF increased from last week’s rate by 0.995 basis points (bps) to 1.7227 percent. The WAIR for the 14-day TDF was however down by 2.876 bps to 1.6972 percent.

“The yields accepted in both tenors shifted lower but widened to a range of 1.6650-2.2500 percent in the 7-day tenor and a range of 1.5000-1.7175 percent in the 14-day tenor,” said Dakila.

The 7-day tenor was offered higher this week at P240 billion from P220 billion previously. Bids matched the offer at P240.09 billion.

The 14-day TDF was also offered higher at P310 billion from P290 billion. Tenders received amounted to P411.46 billion, lower compared to Jan. 19 of P449.68 billion.

The BSP introduced the TDF in 2016 after it shifted to the interest rate corridor system to bring market rates closer to the policy rate.