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Manila Bulletin devider Business devider Banks still prefer shorter-dated TDF – BSP

Banks still prefer shorter-dated TDF – BSP

Published Feb 15, 2023 04:03 pm

With the market expecting a policy rate hike on Thursday, Feb. 16, the central bank’s term deposit facility (TDF) fetched higher yields on Wednesday, Feb. 15, and bids of P431.93 billion versus P323.39 billion last week.

Bangko Sentral ng Pilipinas (BSP) Deputy Governor Francisco G. Dakila Jr. said banks are still showing a preference for the shorter-dated tenor.

“The results of the TDF auction reflected strong demand for the shorter tenor with the BSP’s policy meeting slated for 16 February. Moving forward, the BSP’s monetary operations will remain guided by its assessment of the latest liquidity conditions and market developments,” he said.

PH peso/Manila Bulletin article photo

The BSP offered P330 billion during the auction, higher compared to Feb. 8’s P260 billion volume. Of the total bids received, the BSP accepted P304.32 billion.

The 7-day tenor has P190 billion on the block, up from last week’s P140 billion. It received P309.54 billion bids versus P175.76 billion previously. The weighted average interest rate (WAIR) rose to 6.3559 percent from 6.3480 percent while the bid coverage ratio increased to 1.6292 from 1.2555.

The 14-day TDF was offered at P140 billion compared to P120 billion last Feb. 8. It was undersubscribed with bids of P122.39 billion which was lower than the previous week’s P147.63 billion. The WAIR increased to 6.3802 percent from 6.3654 percent while the bid coverage ratio dropped to 0.8743 from 1.2303.

The BSP’s Monetary Board will hold its first monetary policy meeting on Thursday. BSP Governor Felipe M. Medalla has earlier signalled to the market his preference to increase the key rate in the first two meetings. The next meeting is on March 23.

The TDF is one of BSP’s main liquidity-mopping tools to ensure inflation will be manageable. Inflation has remained above-target since April 2022 as an impact of the Ukraine war with Russia. To ensure inflation will return to the government’s two percent to four percent target, the BSP raised the benchmark rate by a cumulative 350 basis points last year.

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