BSP offers P20 B for 14-day TDF

The Bangko Sentral ng Pilipinas (BSP) has set to P20 billion the introductory volume for the 14-day term deposits at yesterday’s auction.

The BSP auction committee expects to raise as much as P80 billion from the auction comprising of P40 billion worth of seven-day term deposits, P20 billion worth of 14-day term deposits, and P20 billion worth of 28-day term deposits.

The central bank decided to introduce the 14-day tenor as part of efforts to use a more market-based approach to monetary operations and due to strong clamor from banks.

“The offering of the 14-day TDF tenor is in response to the strong interest of BSP’s various counterparties for a tenor longer than seven days but shorter than 28 days following a series of BSP consultations,” the BSP said.

The BSP currently bids out seven- and 28-day term deposits since the TDF was launched in June 2016 as part of the shift to the interest rate corridor (IRC) system.

The IRC is a system for guiding short-term market interest rates toward the central bank target or policy rate. It is intended to help ensure that money market interest rates move within a reasonably close range around the BSP’s policy rate.

The close relationship be- tween the policy rate and market interest rates provides the fundamental basis for monetary policy transmission. The BSP is able to generate a more effective policy signal as market rates closely track the policy target rate.

From an introductory volume of P30 billion in June 2016, the BSP auction committee gradually raised the volume of the TDF six times to reach P180 billion in December in the same year.