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TDF rates rise, bids were lower at auction

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By Lee C. Chipongian

Yields were up this week but banks offered lower bids for the central bank’s term deposit facility (TDF) auction.

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Based on Bangko Sentral ng Pilipinas (BSP) auction results yesterday, total bids amounted to P42.80 billion, less than offer of P50 billion. Tenders were lower than the previous week’s P60.83 billion.

All three tenors have higher rates this week. The 14-day average rate rose to 5.1770 percent from 5.1437 percent last Wednesday. Offered at P20 billion, bids only amounted to P18.80 billion which was lower compared to last week’s P20.16 billion.

The 28-days average rate also increased to 5.1779 percent from 5.1547 percent on January 23. With a P10-billion volume, the longer-dated TDF attracted bids of P12.42 billion, more than last week’s P10.51 billion.

In the meantime, the 7-day TDF’s yields climbed to 5.0654 percent from 5.0447 percent last week. Tenders of P11.57 billion were short of the P20-billion offer.

The BSP has already implemented refinements in the interest rate corridor (IRC) system which it adopted in June of 2016 for operational flexibility.

BSP Deputy Governor Diwa C. Guinigundo said that they are continuously fine-tuning and reviewing possible changes to the IRC framework and especially in the TDF, one of its primary open market operations and liquidity-absorbing policy tool.

He said that on the table always is the possible addition of one more tenor higher than the 28-day, such as a two-month TDF, or conducting more than one auction per week.

The concern with introducing a fourth tenor, which will be longer-dated, is that it will compete with the 91-day Treasury Bills. “Some (in the market) would want further scope to increase maturity to 56-days but that’s too close to the 91-days (of the Bureau of the Treasury),” said Guinigundo.

Guinigundo also said that right now, it is not possible to have two TDF auctions in a single week as this would deplete the offer size and also overlap with National Government auctions.

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