TDF rates, bids mixed this week

The market again preferred the shorterdated term deposit facility (TDF) during the auction yesterday, with bids of R43.893 billion versus offer of R40 billion.

Based on Bangko Sentral ng Pilipinas (BSP) data, the weighted average rate for the 7-days TDF however slipped to 3.3402 percent compared to last week’s 3.3554 percent. Bid coverage ratio also fell to 1.0973 from 1.6019.

The 7-days TDF had lower bids this week than the previous Wednesday’s R64.076 billion.

The 28-days were back to being under-subscribed and pushed the total auction bids to R131.455 billion, much lower compared to last week’s R166.956 billion.

The auction volume was R140 billion, or R100 billion for the 28-days and R40 billion for the 7-days.

The longer-dated tenor attracted lower bids of R87.562 billion yesterday, from last week’s R102.880 billion. Its rate or the average accepted yield was stable at 3.4927 percent, barely changed from 3.4925 last week. Bid coverage ratio fell to 0.8756 from 1.0288.

For the October 25 auction, the BSP indicated that it will keep the same offer volume of R140 billion.

The TDF introduced in June of last year, is expected to promote the establishment of benchmarks for short-term interest rates.

The central bank shifted to the interest rate corridor or IRC – 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.”

The IRC is a system for guiding short-term market rates towards the BSP policy interest rate which is the overnight reverse repurchase (RRP) 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, the ODF, the overnight RRP facility, and the TDF.