Rates rise at BSP’s TDF weekly auction

The average rates of the central bank’s term deposit facility (TDF) rose in this week’s auction, with volume reduced by R50 billion in the 28-days.

The 28-days fetched a weighted average yield of 3.4940 percent versus last week’s 3.4920 percent while the 7-days had a more significant 3.4171 percent increase from the previous’ 3.4005 percent.

The offer size of the 28-days were reduced to R40 billion this week from R90 billion last Wednesday. It was still undersubscribed with tenders amounting to R32.840 billion.

The 7-days had a little more attention with bids totaling R41.269 billion against offer of R40 billion.

The longer-dated tenor’s bid coverage ratio stood at 0.8210 while the shorter TDF had 1.0317.

The BSP announced yesterday that for the December 13 auction, the R80 billion volume stays. This is R40 billion R40 for the 28-days and also the 7-days.

BSP Deputy Governor Diwa C. Guinigundo had explained that as they expected, banks are taking out their excess liquidity from BSP facilities to increase lending activities as well as to buy foreign exchange for imports requirement and investments in government securities.

These were the reasons why the TDF volume has been cut for the fourth time since September this year.

The TDF’s peak of demand was around December last year when the BSP raised its offer size to R180 billion from just R30 billion in June of the same year. The TDF was introduced on June 3, 2016.

From R150 billion at the beginning of 2017, the 28-day TDF is now reduced to just R40 billion, reflecting low demand as investors are sidetracked by retail treasury bond offerings. (LCC) billion for