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Manila Bulletin devider Business devider BSP's TDF attracts higher yields this week

BSP's TDF attracts higher yields this week

Published Aug 31, 2022 03:53 pm

The central bank’s term deposit facility (TDF) fetched higher interest rates on Wednesday, Aug. 31, with total bids amounting to P317.60 billion versus offer of P240 billion.

“The results of the TDF auction show market participants’ greater preference for the shorter tenor,” said Bangko Sentral ng Pilipinas (BSP) Deputy Governor Francisco G. Dakila Jr.

Bid rates continued to increase after the BSP’s Monetary Board raised the benchmark rate by another 50 basis points (bps) last Aug. 18 as well as the US Federal Reserve’s more aggressive rate hikes of the past months, he added.

BSP building and logo/Reuters

On Wednesday, the 7-day TDF attracted P195.30 billion tenders against offer of P140 billion. This was higher compared to P182.57 billion bids last Aug. 25. The tenor’s volume was adjusted higher from P120 billion previously.

Meantime, the tenor’s weighted average interest rate (WAIR) rose to 3.8051 percent from 3.7876 percent. The bid coverage ratio however dropped to 1.3950 from 1.5214.

The 14-day TDF was also offered higher this week at P100 billion from P80 billion on Aug. 25. It received P122.30 billion bids versus P137.87 billion last week. Its WAIR increased to 3.8454 percent from 3.8099 percent. Despite the higher volume, the bid coverage ratio also dropped to 1.2230 from 1.7234 with lower demand.

Still, Dakila said both tenors were oversubscribed, with bid-to-cover ratios at 1.40x and 1.22x for the 7-day and 14-day TDF, respectively. “Total tenders reached P317.604 billion, at the high end of the BSP’s expected volume range,” he also said.

Dakila said the yields accepted during the auction has shifted higher but narrowed to a range of 3.7000 percent to 3.8500 percent in the 7-day TDF and 3.7000 percent to 3.9000 percent in the 14-day TDF.

The BSP’s TDF is one of its main liquidity-mopping facility to manage inflation. It was first introduced in 2016 as part of the interest rate corridor framework to bring the market rates closer to the BSP key rate.

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