TDF auction oversubscribed for 2nd week

The central bank’s term deposit facility (TDF) remained oversubscribed for the second week but yields decreased on all tenors.

The total bids across TDFs amounted to R129 billion on Wednesday versus offer of R100 billion and more than last week’s R125.16 billion, based on data released by the Bangko Sentral ng Pilipinas (BSP).

Banks tendered R49.382 billion for the 7-day TDF, lower than the previous week’s R58.556 billion. The average rate dropped to 3.7537 percent from 3.7523 percent. The shortest-dated tenor is offered at R40 billion.

Also offered at R40 billion, the 14-days remained oversubscribed at R51.390 billion which was more than the bids received last week of R44.335 billion. Yields likewise fell to 3.925 percent from 3.9309 percent.

The longer-dated 28 days received tenders of R28.234 billion versus the previous week’s R22.266 billion. It was offered at R20 billion. This tenor’s averate rate was lower at 3.9346 percent from 3.9442 percent.

The TDF is a BSP tool intended for liquidity management, and after a year of adoption, paved the way for the central bank to reduce banks’ reserve ratio this year. Slashing the reserves ratio will enable banks to have more funds or liquidity which the BSP said will support economic activity and the capital market development.

The BSP has so far reduced the reserve requirement ratio twice this year or by two percentage points and releasing additional liquidity into the financial system which in turn was absorbed back by the central bank’s open market operations such as the TDF.

In May, when it cut the RRR anew to 18 percent, the BSP said the move was an operational adjustment and are part of the BSP’s shift toward a more market-based implementation of monetary policy. It added that the RRR reduction should “promote a more efficient financial system by lowering intermediation costs.”