The central bank’s term deposit facility (TDF) attracted P323.39 billion bids on Wednesday, Feb. 8. It was oversubscribed while average rates for the 7-day and 14-day tenors increased.
Bangko Sentral ng Pilipinas (BSP) Deputy Governor Francisco G. Dakila Jr. said demand was higher compared to the Feb. 1 auction ahead of next week’s Monetary Board policy meeting.
“The results of the TDF auction reflected strong demand from eligible counterparties amid rate hike expectations from the BSP and the Bureau of the Treasury’s RTB 29 offering,” said Dakila.
The BSP offered P260 billion TDF this week, lower compared to the previous Wednesday’s P270 billion.
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“Both tenors were oversubscribed, with the respective bid-to-cover ratios (BCR) for the 7-day and 14-day TDF at 1.255x and 1.230x. Nonetheless, total tenders received reached P323.399 billion, which was well above the BSP’s expected volume range,” said Dakila.
The 7-day TDF was offered at P140 billion, lower than P150 billion last week. It received P175.76 billion tenders which was higher than the previous P145.28 billion. The weighted average interest rate (WAIR) rose to 6.3480 percent or up by 0.3538 basis point (bp) while the BCR at 1.2555 was higher than last week’s 0.9685.
The 14-day tenor, meantime, was still offered at P120 billion and attracted P147.63 billion tenders, up from P132.54 billion previously. The WAIR increased to 6.3654 percent or by 1.4436 bps while the BCR of 1.2303 was higher from Feb. 1’s 1.1045.
The BSP’s Monetary Board will have its first policy meeting for the year on Feb. 16, next week. The market expects the BSP to increase the key rate by 25 to 50 bps which will bring the benchmark rate to 5.75 percent or six percent from 5.5 percent.
The TDF is one of the central bank’s main liquidity-mopping facilities to manage inflation. In January, inflation climbed to a fresh 14-year high of 8.7 percent from 8.1 percent in December. The higher inflation rate beat all forecasts including the BSP’s own projection of 7.5 percent to 8.3 percent.