TDF has lower bids and rates

The central bank’s term deposit facility (TDF) was still offered at P300 billion this week but attracted lower bids of P329.97 billion versus the previous auction of P409.61 billion. Bangko Sentral ng Pilipinas (BSP) Deputy Governor Francisco G. Dakila Jr. noted continued demand for the TDF despite that it has retained last week’s volume. Meanwhile, the TDF’s average rates have decreased with the market expecting the BSP will likely pause its rate hikes next month. The BSP rate is currently at 6.25 percent. “The results of the auction reflected market participants' sustained demand for the TDF,” said Dakila. On Wednesday, April 19, the 7-day TDF was offered at P170 billion and attracted P184.25 billion bids. This was lower compared to P251.91 billion tenders last week. Its weighted average interest rate (WAIR) dipped at 6.5902 percent from 6.5939 percent last April 12. The tenor has a lower bid coverage ratio of 1.0838 from 1.4819. The 14-day TDF was offered at P130 billion and received P145.72 billion bids. This was lower compared to last week’s P157.7 billion bids for the two-week tenor. Meanwhile its WAIR fell to 6.6153 percent from 6.6362 percent. The bid coverage ratio dropped to 1.1209 from 1.2131. Dakila said the respective bid-to-cover ratios for the 7-day and 14-day TDF stood at 1.084x and 1.121x. The WAIR for the 7-day TDF fell by 0.3695 basis point (bp) and the 14-day TDF fell by 2.0994 bps. “The range of yields accepted for the 7-day tenor shifted lower and widened to 6.3000-6.6288 percent, while that for the 14-day also shifted lower and widened to 6.5000-6.6400 percent,” said Dakila. The BSP’s TDF is an interest rate corridor facility to bring the market rates closer to the BSP key rate. Basically, the TDF absorbs excess money in the financial system to control inflationary pressures. The BSP will hold its next policy meeting on May 18 and the market expects the BSP will finally pause in its tightening mode after nine straight rate hikes.