The auction of term deposit facility (TDF) continue to attract lower yields this week while tenders amounting to P741.22 billion were also lower compared to the previous P771.29 billion.

The volume offered by the Bangko Sentral ng Pilipinas (BSP) was P550 billion, more than the P540 billion last July 7.

The 7-day TDF was offered at P160 billion, up from P150 billion last week. The tenor received P215.97 billion bids compared to P216.21 billion previously. Its average interest rate fell to 1.7097 percent versus 1.7176 percent. The bid coverage ratio, in the meantime, dipped to 1.3498 from 1.4414 as there was less demand.

The 14-day TDF was still offered at P390 billion. Tenders amounted to P525.25 billion, lower than the previous P555.08 billion. The average interest rate also declined to 1.7817 percent from 1.8014 percent. Banks have reduced demand for the TDF resulting to a bid coverage ratio of 1.3468 which was lower than last week’s 1.4233.

BSP Deputy Governor Francisco G. Dakila Jr. said Wednesday that there is still strong demand for the weekly TDF auction.

“The BSP increased the TDF offer volume by P10 billion to P550 billion and allocated P160 billion (from P150 billion) and P390 billion (maintained) between the 7-day and 14-day TDF, respectively,” he said.

“Both tenors were oversubscribed with the 7-day and 14-day tenors each receiving bids about 1.35x their respective offer volumes,” added Dakila.

The BSP official also noted that with the weighted average interest rates or WAIR for both tenors still on the decline, the “yields accepted in both tenors remained low and further narrowed” to a range of 1.700 percent to 1.718 percent for one-week tenor and 1.750 percent to 1.798 percent for the 14-day TDF.

“The auction results reflect market participants’ continued strong demand for the BSP’s term deposits amid sustained ample liquidity in the financial system,” Dakila reiterated.

The TDF was part of the BSP’s interest rate corridor system first introduced in 2016. There used to be a 28-day tenor which has since been migrated as the 28-day BSP securities beginning in October 2020.

Source: Manila Bulletin (