BSP brings back 28-day TDF next week

The central bank is bringing back the 28-day term deposit facility (TDF) next week with an initial volume of R20 billion.

“Market players continue to express interest in the 28day TDF,” Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa C. Guinigundo said yesterday.

With the 7-day TDF still at R40 billion, the auction size is increased to R60 billion. The BSP temporarily removed the 28-day tenor last December 20 because of consistent undersubscriptions with banks diverting funds to lending, loan prepayments, investments in retail bonds, and foreign exchange purchases for import requirements.

The R20-billion 28-day TDF volume was lower than its previous offer of R40 billion. It will be reoffered on February 7.

BSP Governor Nestor A. Espenilla Jr. said there is “strong overall demand” for the facility. “We’re feeling out the tenor preference and we will adjust supply accordingly in future auctions to meet our IRC (interest rate corridor) objectives.”

Guinigundo for his part, said: “We are seeing the return of liquidity to the banks after the holiday season and the impact of the sustained release of public funds for infrastructure and other social projects. The BSP has more liquidity to bring back to its TDF facility on top of the overnight deposit facility and the RRP facility and in the process ensure appropriate level of domestic liquidity and price stability.”

During Wednesday’s auction, the 7-day TDF rate was again lower this week at 2.7785 percent compared to the previous 2.9256 percent. BSP accepted yields ranged from 2.7 percent to 2.85 percent.

The bids were also lower at R116.634 billion from last week’s R125.564 billion.

With the return of the 28days to temper liquidity growth, the BSP is expected to further enhance its TDF auction by introducing the 14-day tenor next month.

By the end of the first quarter, the BSP will have a line up of three tenors for its TDF auction: the 7-day, the new 14-day and the 28-day.