TDF rates increase; BSP shortens lead time for weekly bids

The central bank’s auction of term deposit facility (TDF) fetched higher rates on Wednesday while volume for each tenors were mixed.

The Bangko Sentral ng Pilipinas (BSP) announced yesterday that based on its liquidity forecasts, it will keep the R180-billion TDF auction size until April 26, its 22nd week of unchanged volume.

The BSP also announced that due to market preference, they have shortened the lead time for informing the market of the TDF volume from two weeks to just one. The decision was “in response to feedback and discussions with industry counterparties.”

“Beginning with May 3 (TDF auction) the details on the offer volumes per tenor will be posted one week before the scheduled auction instead of a twoweek lead time,” said the BSP.

The TDF is primarily a central bank liquidity absorption facility and it siphons off significant structural liquidity to “bring market rates closer to the BSP policy rate.”

The TDF volume was regularly adjusted until December 1 when it remained at R180 billion, or R150 billion for the 28 days and R30 billion for the 7 days. Since the auction started last June 3, 2016, it has increased volume seven times. How much volume depends on the BSP’s assessment of liquidity needed to be siphoned or injected to bring market rates closer to the central bank rate. The BSP has started with small TDF volumes to “prevent any undue tightness in liquidity conditions.”

During Wednesday’s auction, the 28-day tenor attracted tenders worth R86.166 billion which was below the offered amount of R150 billion. The longer-dated tenor has been underscribed for the fifth week. Its weighted average accepted yield was higher at 3.4565 percent from the week before at 3.4499 percent. Bid coverage ratio continue to drop to 0.5744 compared to last week’s 0.6679.

The 7-days, in the meantime, had a higher demand of R41.342 billion versus offer of R30 billion. The weighted average accepted rate increased to 3.3615 percent from last week’s 3.2109 percent. The bid coverage ratio also went up to 1.3781 percent from 0.9908 percent.

BSP Governor Amando M. Tetangco Jr. said they will continue to watch out for bank positions and liquidity requirements and “refresh our liquidity forecasts as needed.”