Rates on term deposits up; tenders below offer

The central bank’s term deposit facility (TDF) yesterday resulted in higher rates but both tenors were undersubscribed with bids totaling R124.38 billion versus offer of R180 billion.

The Bangko Sentral ng Pilipinas (BSP) is regularly reviewing the auction size and if the current volume is still what the market needs based on their metrics and analysis.

“We need to carefully analyze today’s TDF auction results as well as the trend of recent results, whether the results are readily explained by temporary and self-correcting reasons or we should already consider refinements to some of our policy settings,” said BSP Governor Nestor A. Espenilla Jr. yesterday.

The R180 billion TDF volume has been unchanged for the last seven months. This is R140 billion for the 28 days and R40 billion for the shorterdated tenor.

During Wednesday’s auction, the 7-day term offered at R 40 billion were undersubscribed at R35.238 billion. This was lower than last week’s R44.378 billion.

It fetched higher rates and lower bid coverage ratio. It ended with a weighted average accepted yield of 3.2597 percent, higher from the previous week’s 3.2189 percent. The bid ratio fell to 0.8810 from 1.1095.

The average rate for the 28 days, in the meantime, increased to 3.4948 percent from the previous 3.4892 percent. Bid coverage ratio dropped to 0.6367 to 0.8305 from 0.9828.

The longer-dated tenor received tenders amounting to R89.142 billion which was lower from last Wednesday’s R116.269 billion against offer of R140 billion. Total 28-day awards were the same as tendered, at R89.142 billion.

The central bank shifted to the interest rate corridor last June 3, 2016 – which created the overnight deposit facility and TDF -- to help “enhance the link between the stance of BSP monetary policy and financial markets and, thereby, impact the real economy.”