BSP’s TDF auction nears 1180 billion

The term deposit auction yesterday attracted more bids compared to the previous week – nearing the offer size of R180 billion – and with the 7-day placements still the preferred deposits.

The increase in demand for the Bangko Sentral ng Pilipinas (BSP) interest-bearing term deposit facility (TDF) was reflected in the higher bid coverage ratios.

The 7-day tenor had more play with bids received and accepted at a ratio of 1.3145, an improvement from last week’s 0.8763. The 28 days’ demand, in the meantime, stood at 0.8733 bid compared to 0.7585 last Wednesday.

The two-tenored TDF received tenders of R174.847 billion in total against offer of R180 billion.

During Wednesday’s auction the 7-day tenor received tenders worth R52.579 billion versus offer and award of R40 billion. This was higher compared to the previous week’s under-offer of R35 billion. Its weighted average rate was slightly improved at 3.3345 percent from 3.3080 percent last week. The accepted yield ranged from 3.25 percent to 3.4 percent.

The 28-day tenor – still undersubscribed – had bids amounting to R122.268 billion against offer of R140 billion. This was higher than last week’s R106.19-billion bids. The average rate for the longer-dated TDF was unchanged at 3.4949 percent. The auction rates saw a range of 3.425 percent to 3.5 percent yesterday.

The TDF is one of the BSP’s primary liquidity absorption facility to ensure there is no excessive money supply which tends to be inflationary. The term deposit auction eventually when volume is more significant is expected to bring market rates closer to the central bank policy rate.

BSP Deputy Governor Diwa C. Guinigundo has said they continue to anticipate market’s appetites for term deposits and that the current auction size of R180 billion remains sufficient.

The TDF was part of the BSP’s restructuring of its open market operations and part of the interest rate corridor system which it adopted mid-2016. The IRC gave way to the BSP’s standing liquidity facilities, namely, the overnight lending facility and the overnight deposit facility, the overnight RRP facility, and the TDF.