BSP TDF auction continues to be undersubscribed
The central bank’s term deposit facility (TDF) continues to be undersubscribed while weighted average rates were steady – trends that were anticipated by monetary officials.
“TDF results continue to demonstrate that one, banks have been funding more loans and investment in government securities and two, shortdated placements are preferred by the market,” according to Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa C. Guinigundo.
The two-tenored TDF received tenders of R141.24 billion yesterday versus offer of R180 billion.
Guinigundo said they continue to review the auction volume and could anticipate investors’ appetites. “This is after all expected by the BSP because we want excess funds of the banks to be channeled to financing productive economic activities including infrastructures.”
“We continue to assess various IRC (interest rate corridor) features including the volume of weekly auction,” he added.
The BSP adopted the IRC system last year for guiding short-term market rates towards the BSP policy interest rate which is the overnight reverse repurchase rate.
With the IRC system the BSP reformed its open market facilities by the introduction of the standing liquidity facilities, namely, the overnight lending facility and the overnight deposit facility, the overnight RRP facility, and the TDF.
During Wednesday’s auction the 7-day tenor attracted R35.05-billion bids which was lower than offer of R40 billion.
The shorter-dated term deposits’ weighted average rates of 3.3080 percent was, however, higher compared to the previous week’s 3.2597 percent. The bid ratio fell to 0.8763 with continued lower demand.
The 28-day tenor had bids and award amounting to R106.19 billion against offer of R180 billion.
This tenor has been undersubcribed for weeks with a few days in between where it managed to exceed offer.
The average rate for the 28 days, in the meantime, were unchanged at 3.4929 percent from last Wednesday’s 3.4948 percent. Bid coverage ratio stood at 0.7585.