BSP’s 28-day TDF oversubscribed 2.5x

Banks bid high for the returning 28-day term deposit facility (TDF) with tenders amounting to R51.43 billion versus offer of R20 billion.

Based on Bangko Sentral ng Pilipinas (BSP) data, the TDF auction yesterday saw both tenors – the 7-day and 28-day – with oversubscriptions.

The 7-day TDF, offered at R40 billion, had tenders amounting to R88.57 billion. The bids were lower than last week’s R116.63 billion. The BSP accepted yields ranging from 2.625 percent to 2.8 percent for the shorter-dated TDF. The weighted average rate dropped to 2.7278 percent compared to the previous auction’s 2.9256 percent.

The 28-days, in the meantime, fetched an average rate of 3.0183 percent. The accepted yield ranged from 2.75 percent to 3.125 percent.

The BSP brought back the 28-day tenor this week. It announced yesterday that it will offer the same volume of R20 billion next Wednesday, February 14.

BSP Governor Diwa C. Guinigundo noted earlier that the market continue to have a requirement for the longerdated TDF. The auction size remain at R60 billion.

The BSP temporarily removed the 28-day tenor last December 20 because of consistent undersubscriptions with banks diverting funds to lending, loan prepayments, investments in retail bonds, and foreign exchange purchases for import requirements.

Guinigundo said that after the holiday period, liquidity returned to the market. It was an appropriate time to bring back the 28-days to ensure “appropriate level of domestic liquidity and price stability.”

The central bank’s deposit facilities serve as a monetary policy instrument for managing domestic liquidity in the financial system.