TDF rates climb to 5% after BSP cut volume

With higher yields, the Bangko Sentral ng Pilipinas’ (BSP) term deposit facility (TDF) were oversubscribed as banks crowded offers of only 170 billion this week.

Average interest rates across tenors rose with 14-day and 28-day TDF hitting above five percent, past the central bank’s overnight policy rate of 4.75 percent. Market rates have moved up following the Monetary Board’s five-time hike this year by a cumulative 175 basis points by November 15.

The 7-day TDF, offered at 140 billion which was less than the 150 billion last week, attracted bids of 154.18 billion. Its rate was up at 4.9738 percent from 4.8291 percent last week.

The 14-day, which has the same volume of 120 billion, received tenders amounting to 129.76 billion. Yields rose to 5.0596 percent versus the previous week’s 4.8642 percent. The 28-day, offered at a reduced 110 billion from last week’s 120 billion, had bids of 114.41 billion while its average rate went up to 5.1186 percent from 4.9162 percent on November 14.

The central bank reduced its auction volume this week by 120 billion or from 190 billion last Wednesday to 170 billion.

The TDF, implemented in 2016, is part of the interest rate corridor (IRC) is a system for guiding short-term market interest rates towards the BSP policy rate which is the RRP or borrowing rate. After raising key rates by 175 bps since May this year, the BSP’s overnight lending rate is now at 5.25 percent and the deposit rate at 4.25 percent.

The IRC system is intended to help ensure that money market interest rates move within a reasonably close range around the BSP’s policy rate, said the BSP.