TDF bids mixed, yields are higher

# TDF bids mixed, yields are higher The central bank’s auction of term deposit facility (TDF) on Wednesday, March 15, attracted P344.19 billion bids versus offer of P340 billion. The weighted average interest rates (WAIR) for the two TDF tenors continued to increase in anticipation of higher Bangko Sentral ng Pilipinas (BSP) benchmark rates next week, March 23, when the Monetary Board policy meeting is held. The market expects the BSP to again raise the key rate by 25 basis points to 6.25 percent. Based on BSP data, the TDF total tenders of P344.19 billion was lower compared to P356.15 billion on March 8. The 7-day TDF, meanwhile, has a higher volume of P220 billion from P200 billion last week. It was undersubscribed at P210.86 billion and also lower from the previous bids of P223.39 billion. Yields for the shorter-dated TDF rose to 6.5537 percent from 6.5070 percent last week. The bid coverage ratio however fell to 0.9585 from 1.1170 because of lower demand. The 14-day TDF, meantime, has a lower offer size of P120 billion from P140 billion last March 8. Bids were more than the offer at P133.33 billion and higher from the previous week’s P132.76 billion. The WAIR also increased to 6.6057 percent from 6.5387 percent. The bid coverage ratio rose to 1.1111 from 0.9843. The BSP’s TDF was first introduced in 2016 as part of the interest rate corridor framework to bring the market rates closer to the BSP key rate. It used to have a 28-day tenor. This tenor became the 28-day BSP bills on September 2020 to complement the TDF’s mopping up operations of excess money in the financial system. The TDF is also a key BSP policy tool to control inflation.