TDF auction fetches higher yield this week

The average rates of the central bank’s three-tenor term deposit facility (TDF) were all up while bids continue to drop at R92.636 billion, below the offer size of R100 billion.

The tenders received were lower compared to the previous week’s R100.63 billion, data from the Bangko Sentral ng Pilipinas (BSP) said.

The 7-days continue to attract higher bids than offer, or R45.831 billion against R40 billion but this was lower compared to last week’s R64.409 billion. The average rate was higher at 3.7523 percent from 3.6927 percent.

The 14-day tenor, in the meantime, received R31.990 billion versus offer of R40 billion. It was more than what it got last week of R28.016 billion. The yields increased to 3.8689 percent from 3.7342 percent last Wednesday.

The 28-day TDF had R14.815 billion in tenders, higher than previous week’s R8.209 billion. The longer-dated tenor remains undersubscribed from offer of R20 billion. Interest rates rose to 3.8471 percent from 3.7326 percent last week.

The BSP said the implementation of the interest rate corridor (IRC) and the TDF for short-term money market benchmarking has been effective since it was adopted in 2016.

The BSP has aimed at influencing money market rates to more closely follow the BSP rate which is the reverse repurchase rate (RRP).

The BSP – in two monetary policy actions in May and in June -- hiked the RRP by a total of 50 basis points to 3.5 percent by June 21, while overnight lending and deposit facilities’ rates were also increased. The decision was in response to a jittery market who has been calling for policy actions. But mainly, it was the BSP’s signal that it is “safeguarding macroeconomic stability in an environment of rising commodity prices and ongoing normalization of monetary policy in advanced economies.” (LCC)