TDF volume to remain at R180 B a week

The Bangko Sentral ng Pilipinas (BSP) is keeping the R180-billion auction size for the term deposit facility (TDF) until the first weeks of January, 2017.

Similar with last week’s results, the TDF auction yesterday were mixed with a still undersubscribed 28day tenors at R137.462 billion versus offer of R150 billion due to seasonality positioning.

The 7-days had better results with amount tendered of R64.538 billion against awarded of R30 billion.

There have been more interest for the shorter tenor for the past two auctions since participants prefer to be in short positions and keep their cash.

The 28-days and the 7-days had bid coverage ratios of 0.9164 and 2.1513, respectively, up from last week’s 0.8499 and 1.9704.

The weighted average accepted yields were 3.0279 percent and 3.4317 percent for the 7-days and 28-days compared to the previous week’s 2.9976 percent and 3.2320 percent.

The BSP utilizes TDF auction to manage liquidity by mopping up excesses in the system.

The BSP has increased the auction size seven times since June when the interest rate corridor (IRC) was first implemented.

The BSP adopted the interest rate corridor or IRC system last June 3.

The IRC is a system for guiding short-term market rates towards the BSP policy interest rate which is the overnight reverse repurchase rate, and to help improve monetary policy transmission and to limit interest rate volatility.

The BSP has increased the TDF volume to R180 billion on December 1, or up by R50 billion.

The auction size has been raised seven times since June.

The auction continues to be effective in mopping up excess liquidity in the system.