TDF undersubscribed but yields are up

The central bank’s term deposit facility (TDF) this week was undersubscribed at P336.74 billion against offer of P430 billion while the average interest rates for both tenors declined.

The TDF volume on Wednesday, April 20, was however higher than the previous week’s P410 billion which received P458.9 billion bids, based on Bangko Sentral ng Pilipinas (BSP) data.


Senior Assistant Governor Iluminada T. Sicat, the BSP’s Monetary and Economics Sector Sector-in-Charge at the moment, said the scheduled funding requirements and tax collections are the reasons for the TDF undersubscriptions as well as “market participants’ preference to hold onto (their) cash”.

Sicat assured though that market conditions “remain normal (and) supported by the sustained ample liquidity in the financial system.”

“Looking ahead, the BSP’s monetary operations will remain guided by its assessment of the latest liquidity conditions and market developments,” she also said.

The 7-day TDF this week was offered at P180 billion, more than the P170 billion volume last April 13, before Holy Week. It received P152.65 billion bids, lower compared to P187.39 billion previously. The tenor’s yield increased to 1.9438 percent from 1.9195 percent while the bid coverage ratio dropped to 0.8481 from 1.1023.

The 14-day TDF also had a higher offer on Wednesday of P250 billion from P240 billion last week. Tenders amounted to P184.09 billion, lower than the previous P271.51 billion. The average rate rose to 1.9245 percent from 1.9196 percent while the bid coverage ratio of 0.7364 was lower from 1.1313 on April 13.

Sicat said both tenors were undersubscribed with the 7-day and 14-day TDF receiving bids 0.85x and 0.74x their respective volume offering. The 336.74 billion bids were lower than the BSP’s expected volume range, she said.

“Compared to last week, the weighted average interest rate for the 7-day TDF rose, settling 2.430 bps (basis points) higher (while the) WAIR for the 14-day TDF increased by 0.488 bp,” noted Sicat.

“The yields accepted in the 7-day TDF shifted higher and widened to a range of 1.8500-2.1900 percent. Meanwhile, the yields accepted in the 14-day TDF slightly shifted lower but widened to a range of 1.5000-2.1900 percent,” she added.

The TDF, first introduced in 2016, brought the BSP policy rate closer to the market rate. As one of BSP’s liquidity-mopping up facilities to manage inflation, the TDF also fine tunes BSP’s liquidity control, along with the reverse repurchase facility and the overnight deposit facility.