TDF bids up, yields are down

The central bank’s auction of term deposit facility (TDF) on Wednesday, March 23, attracted higher bids of P514.85 billion against offer of P370 billion while the weighted average interest rate (WAIR) for both tenors declined.

Based on Bangko Sentral ng Pilipinas (BSP) data, the 7-day TDF which was still offered at P150 billion, received P198.74 billion tenders, higher than March 16’s P185.75 billion. The WAIR fell to 1.9467 percent from 1.9603 percent last week. The bid coverage ratio, meantime, improved to 1.3294 versus 1.2384 previously.

The 14-day TDF was offered lower this week at P220 billion from P230 billion. Bids amounted to P316.11 billion which was higher than last week’s P260.73 billion. The yield also dropped to 2.0374 percent compared to 2.0905 percent last March 16. With high demand, the bid coverage ratio increased to 1.4349 from 1.1336.

“The auction results reflect the impact of the continued normalization in financial system liquidity amid market expectations of progressive tightening by the US Federal Reserve. Nevertheless, liquidity in the financial system remains ample,” said BSP Deputy Governor Francisco G. Dakila Jr.

BSP Deputy Governor Francisco G. Dakila Jr.

Dakila noted that both tenors were oversubscribed with bid-to-cover ratios at 1.32x and 1.44x the volume offering in the 7-day and 14-day tenors, respectively.

Dakila also said the WAIR for the 7-day TDF was off 1.366 basis point (bps) while the 14-day TDF also declined by 5.306 bps. “However, the yields accepted in both tenors shifted higher but narrowed to a range of 1.8300-2.0000 percent in the 7-day TDF and 1.8825-2.1000 percent in the 14-day TDF,” he added.

The TDF, one of BSP’s liquidity-mopping open market operations, was first offered in 2016 after the BSP shifted to the interest rate corridor system to bring market rates closer to the policy rate.

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