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TDF rates sustain hike this week

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By Lee  C. Chipongian

The average yield of the Bangko Sentral ng Pilipinas’ (BSP) term deposit facility (TDF) continue to rise this week on mixed bids while the auction size was reduced by P30 billion.

 

Bangko Sentral ng Pilipinas (BSP) logo

The BSP, which has been comfortable with a P100 billion auction size since June 6, on Wednesday cut the TDF volume down to P70 billion.

The 14-day TDF’s P40 billion offer size was slashed to P20 billion, while the 28-day was reduced from P20 billion to P10 billion. The P40-billion volume for the 7-day tenor is retained.

The auction attracted P93.13 billion bids compared to the previous Wednesday’s P95.30 billion. It is lower than auction size of P100 billion.

All tenors sustained averate rate increases. The 7-day fetched 4.3744 percent rate, up from last week’s 4.3218 percent. Offered at P40 billion, it attracted bids of P38 billion from P31.96 billion.

The 14-day TDF average rate rose to 4.4224 percent from 4.4123 percent. Tenders received totaled P44.95 billion against offer of P40 billion. Bids were up from P42.67 billion last week.

The 28-day’s yield also increased to 4.4824 percent from the previous week’s 4.4515 percent. It had tenders of P10.18 billion versus last week’s P20.67 billion. But at P20 billion offer, banks were awarded
only P9.68 billion yesterday.

With policy rates up by 100 basis points since May this year, the BSP has been encouraging market rates to mirror benchmark prices.

An auction-based open market facility such as the TDF under the interest rate corridor (IRC) system was adopted by the BSP in mid-2016 to guide short-term market rates towards the BSP policy interest rate which is the overnight reverse repurchase rate.

BSP Governor Nestor A. Espenilla Jr. said earlier that the higher TDF rates is expected and what they want encouraged.

The higher TDF rates, he said, is “reasonable under the circumstances”.

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