TDF rates continue to drop at auction
The Bangko Sentral ng Pilipinas (BSP) will still offer R180 billion in its term deposit facility (TDF) auction as March approaches while its rates continue to decline.
During Wednesday’s TDF transactions, the 7-day term deposits received tenders amounting to R51.07 billion against award of R30 billion. Its weighted average accepted rate decreased to 3.0103 percent from last week’s 3.0219 percent.
The 28 days were also oversubscribed at R204.045 billion versus offer and award of R150 billion. Its weighted average accepted yield dropped to 3.4007 percent from the previous week’s 3.4106 percent.
The BSP announced yesterday that it will continue to offer R180 billion on March 1, as R150 billion for the 28 days and R30 billion for the 7 days. The amount has been in place for the last 13 weeks of the auction.
The central bank makes use of its deposit facility to manage liquidity by mopping up excesses in the system. The TDF was part of the interest rate corridor (IRC) framework that the BSP adopted in June of last year to manage interest rate volatility and to bring market rates closer to the BSP benchmark.
Basically the IRC is a system for guiding short-term market rates towards the BSP policy rate. This is the overnight reverse repurchase rate which has remained flat at three percent since June 2016.
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 the IRC was first implemented.