BSP’s TDF attracts higher yields


The yields of the central bank’s term deposit facility (TDF) continued to increase this week while tenders were mixed with P392.59 billion bids versus offer of P400 billion.

The offered volume was higher than the previous week’s P330 billion which also attracted lower tenders of P233.47 billion.

BSP building and logo/Reuters

“The results of the TDF auction reflect eligible counterparties’ preference for the shorter tenor following the release of the November CPI data and with a policy decision expected from the BSP on 15 December,” commented Bangko Sentral ng Pilipinas (BSP) Deputy Governor Franciso G. Dakila Jr. on Wednesday, Dec, 7.

The 7-day TDF had a higher offer of P220 billion this week, up from Nov. 29’s P180 billion. The tenders amounted to P226.06 billion while the BSP awarded P220 billion. The weighted average interest rate or WAIR increased to 5.9346 percent from 5.7514 percent last week. The bid coverage ratio also rose to 1.0275 from 0.6208.

The 14-day tenor was also given a bigger volume this week of P180 billion versus P150 billion previously. It received P166.53 billion bids and awarded P166.33 billion. The yield also increased to 6.0550 percent from 5.8662 percent last week. The bid coverage ratio of 0.9252 was higher than the previous 0.8115.

Dakila said there was preference for the shorter tenor.

“Only the 14-day TDF was undersubscribed with bid-to-cover ratios at 1.03x and 0.93x the respective offer volumes in the 7-day and 14-day TDF. Nonetheless, total tenders received reached P392.591 billion, which was well within the BSP’s expected range of volume,” said the BSP official.

Of the total bids received, the BSP accepted P386.334 billion.

Dakila also noted that the WAIR for the 7-day TDF increased by 18.3126 basis points (bps) while the 14-day TDF rose by 18.8796 bps. “The yields accepted for both tenors likewise shifted higher. However, the 7-day tenor narrowed to a range of 5.7000-6.1250 percent, while the 14-day tenor widened to 5.7500-6.3500 percent,” he added.

The market expects the BSP to again raise the benchmark rates next week, Dec. 15, by at last 50 bps. This will bring the policy rate to 5.50 percent.

The BSP has so far increased the policy rate by a cumulative 300 bps as of Nov. 17, to reanchor inflation expectations and to ease exchange rate pressures. Inflation rate averaged at 5.6 percent as of end-November, above the government target of two percent to four percent. The November rate of eight percent is the highest this year.

The first TDF auction was conducted in 2016 when the BSP adapted the interest rate corridor system to bring the market rates closer to the benchmark overnight rate.