BSP takes ‘wait and see’ stance on TDF auction

THIS is a challenging year, particularly because of further interest rate increase in the US, prompting the central bank to take a wait and see stance before making any adjustment in its term deposit facility (TDF) auction.

“Of course, you don’t want to weekly volume, Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa Guinigundo told reporters on the sidelines of the Annual - munity late Tuesday.

The BSP determines TDF volume on offer by based on how it perceives liquidity circulating in “We can go up and we can also go down, depending on the results of our liquidity forecast. We do the liquidity forecast on a daily and weekly basis. That would guide us in terms of how much do we need to mop up. That is our guide for the auction,” he said.

At this point the central bank is not inclined to tweak the weekly amount on offer. “We have to wait and see, because this is a very challenging year,” Guinigundo noted.

The TDF auction was oversubscribed anew on Wednesday, and the BSP fully awarded the P180-billion weekly offer against bids of over P221 billion for both the seven- and 28-day facilities.

After the holidays, funds are flowing back to the banking system, said BSP Governor

Amando Tetangco Jr.

Bids for the seven- day tenor totaled P49.20 billion, with the weighted average yield down at 3.04 percent from 3.07 percent.

The 28- day facility garnered P172.05 billion, with a lower weighted average yield rate of 3.35 percent from 3.37 percent.

“We noticed the decrease in average rates for both tenors from last week’s auction as banks try to invest their excess funds,” Tetangco told reporters on Wednesday.

“We will continue to monitor liquidity conditions in the market to see if there is need to adjust policy levers,” he added.

As the BSP does not have the mandate issue any debt instrument, it uses TDF to withdraw a chunk of the liquidity from the rates closer to the policy rates of 3 to 3.5 percent.