In­vestors flock to TDF as BSP dan­gles new tenor

Business World - - BANKING & FINANCE - By Melissa Luz T. Lopez Se­nior Re­porter

BANKS SWARMED the term de­posit fa­cil­ity (TDF) yes­ter­day as the cen­tral bank started of­fer­ing a two-week in­stru­ment, with the strong de­mand driv­ing yields lower across all tenors.

De­mand for term de­posits of­fered by the Bangko Sen­tral ng Pilip­inas ( BSP) reached P150.757 bil­lion, surg­ing from the P140.003 bil­lion re­ceived the pre­vi­ous week and hit­ting nearly dou­ble the P80 bil­lion placed on the auc­tion block on Wed­nes­day.

The higher de­mand came as the cen­tral bank in­tro­duced a 14-day tenor for the term de­posits, start­ing with a P20-bil­lion of­fer­ing. The vol­ume was met with P45.46 bil­lion in ten­ders, which fetched an av­er­age yield of 2.8737% as banks wanted re­turns rang­ing from 2.7-3%.

Sus­tained ap­petite for the week-long and month-long tenors also drove yields down for these in­stru­ments.

The P40 bil­lion worth of seven-day de­posits saw bids reach P65.362 bil­lion, lower than the P88.573- bil­lion of­fers re­ceived the pre­vi­ous week. Still, the av­er­age rate de­clined to 2.7232% from 2.7278% amid over­whelm­ing de­mand.

The 28- day term de­posits like­wise stood over­sub­scribed yes­ter­day, with banks want­ing to place P39.935 bil­lion against the P20-bil­lion on of­fer. Yields av­er­aged 2.965%, well be­low the 3.0183% fetched a week ago.

Since June 2016, the TDF has been the cen­tral bank’s main tool to cap­ture ex­cess liq­uid­ity in the fi­nan­cial sys­tem. The win­dow al­lows banks to park the idle cash they hold un­der the BSP in ex­change

for a small mar­gin, which in turn will prompt mar­ket rates to inch closer to the three per­cent bench­mark set by the cen­tral bank.

Any ex­cess cash which have not been de­ployed for loans, for­eign ex­change and debt pay­ments can be parked un­der the cen­tral bank win­dow in or­der to make small gains, rather than leave these idle in­side bank vaults.

Wed­nes­day marked the first time when the BSP in­tro­duced the two-week in­stru­ment, in re­sponse to mar­ket pref­er­ence for shorter-termed in­stru­ments.

Sought for com­ment, BSP Deputy Gover­nor Diwa C. Guini­gundo said re­sults of this week’s auc­tion showed that lo­cal play­ers con­tinue to hold abun­dant money sup­ply.

“The over­sub­scrip­tion on all tenors de­spite the of­fer­ing of the new 14-day TDF is a clear tes­ti­mony that the bank­ing sys­tem con­tin­ues to ex­pe­ri­ence sub­stan­tial liq­uid­ity fol­low­ing the sus­tained re­turn of money to the banks af­ter the hol­i­days and the na­tional gov­ern­ment’s RTB (re­tail Trea­sury bond) float,” Mr. Guini­gundo said in a text mes­sage.

“The BSP is also more flex­i­ble in con­sid­er­ing fast chang­ing liq­uid­ity con­di­tions in de­ter­min­ing the ap­pro­pri­ate vol­ume of liq­uid­ity to mop up to help at­tain price sta­bil­ity while of­fer­ing more in­stru­ments to the cap­i­tal mar­kets,” the cen­tral bank of­fi­cial added.

Mr. Guini­gundo has said that banks fa­vor shorter tenors as these lend more “flex­i­bil­ity” in man­ag­ing funds, ver­sus a month­long lock-in pe­riod un­der the BSP fa­cil­ity.

For next week, the cen­tral bank will of­fer P110-bil­lion worth of term de­posits P50 bil­lion for the seven-day pa­pers, P40 bil­lion for the 14-day tenor, and P20 bil­lion for the 28-day de­posits.

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