TDF bid award lower, yield results mixed
The central bank’s auction of term deposit facility (TDF) yesterday attracted lower bids of R113.158 billion compared to the previous week’s R120.720 billion, with mixed yields.
Banks’ submitted tenders were still more than offer of P100 billion but only the 7-day tenor, which had a lower average rate this week, were oversubscribed at R58.282 billion versus offer of R40 billion. Its weighted average yield fell to 3.6979 percent from June 6’s 3.7006 percent.
Based on Bangko Sentral ng Pilipinas (BSP) data, both the 14days and 28-days were undersubscribed but fetched higher averate rates of 3.7222 percent 3.7264 percent, respectively, compared to the previous week’s 3.6916 percent and 3.7179 percent.
The 14-day TDF, offered at R40 billion, received tenders amounting to R39.095 billion while the 28-days had R15.781 billion against offer of R20 billion.
he TDF auction was first implemented on June 2016 when the central bank shifted to the interest rate corridor or IRC system. The BSP in a report said the IRC has strengthened monetary policy transmission.
While the TDF is one of the BSP’s main liquidity management tool, it continues to review policy changes in the interbank repurchase agreement or repo market for better liquidity control.
The BSP controls the level of domestic liquidity through various monetary tools such as the open market operation or OMO. Repo agreements are one of the OMO instruments where the BSP buys government securities from a bank with a commitment to sell it back at a predetermined rate. A repo transaction increases a bank’s reserves.
The central bank shifted to the IRC system two years ago to help enhance the link between the stance of BSP monetary policy and financial markets. The system helps guide shortterm market rates towards the BSP policy interest rate which is the overnight reverse repurchase (RRP) rate.
With the IRC system the BSP reformed its open market facilities by the introduction of the standing liquidity facilities, namely, the overnight lending facility and the overnight deposit facility, the overnight RRP facility, and the TDF.