BSP offers 14-day TDF for auction

The Bangko Sentral ng Pilipinas (BSP) said it will start offering 14-day term deposit facility (TDF) on February 14, Wednesday, at an initial auction size of R20 billion.

According to the BSP, the introduction of the new TDF is “part of its efforts to use a more market-based approach to monetary operations.”

“The offering of the 14-day TDF tenor is in response to the strong interest of BSP’s various counterparties for a tenor longer than 7-days but shorter than 28days following a series of BSP consultations,” said the BSP. “This is also expected to further refine the BSP’s instruments and operations under the interest rate corridor system (IRC).”

The TDF auction this week will have a volume of R80 billion, broken down as R40 billion for the 7-days, and R20 billion each for the 28-days and the new 14-day.

The central bank just brought back the 28-day TDF last February 7 after discontinuing its offer on December 20.

The TDF improves the market’s price discovery. When it was introduced on June 3, 2016, the BSP offered only two tenors but is always open to offer a third tenor.

BSP Deputy Governor Diwa C. Guinigundo said earlier that TDF offerings are based on their “careful liquidity forecasts” and for a time, banks prefer “very short-term instruments” such as the 7-days to allow them flexibility in servicing the needs of their clients and in their fund diversion.

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