Yields for the two-tenor term deposit facility (TDF) increased this week while demand is sustained, according to Bangko Sentral ng Pilipinas (BSP) Deputy Governor Francisco G. Dakila Jr.

Peso bills

The BSP offered a lower amount this week of P560 billion versus P570 billion last September 1. The auction attracted P614.07 billion total bids which was lower than P618.29 billion previously.

“Both tenors were oversubscribed with the 7-day and 14-day TDF receiving bids 1.20x and 1.06x their respective offer volumes,” said Dakila. The bids are still “well within the BSP’s expected volume range,” he added.

The 7-day TDF, offered higher at P160 billion from P150 billion last week, received tenders amounting to P191.36 billion. This was lower compared to P232.83 billion bids received last September 1. The average interest rate was up at 1.7143 percent from 1.7121 percent. The bid coverage ratio was down to 1.1960 from 1.5522 of the previous Wednesday.

The 14-day TDF, in the meantime, was offered lower at P400 billion from P420 billion last week. Bids totaled P422.71 billion, up from P385.46 billion previously. The average rate increased to 1.7517 percent from 1.7381 percent. The bid coverage ratio for this tenor rose to 1.0568 from 0.9178.

The weighted average interest rate (WAIR) were higher week-on-week.

“The WAIR for the 7-day TDF increased by 0.228 bp (basis points) to 1.7143 percent while that for the 14-day TDF rose by 1.363 bps to 1.7517 percent,” noted Dakila. “The range of yields accepted shifted slightly higher and widened to a range of 1.6900-1.8500 percent in the 7-day tenor but narrowed to a range of 1.7050- 2.0000 percent in the 14-day tenor,” he also said.

Dakila said the September 8 TDF auction results are showing “continued preference of market participants toward the shorter tenor.”

“Nevertheless, market conditions remain normal amid sustained ample liquidity in the financial system,” he added.

The TDF weekly auction, similar to the BSP securities facility auction every Friday, mop up excess liquidity from the financial system, to help the BSP manage the inflation path.

Currently, due to global oil price volatility, the inflation rate is exceeding the BSP’s two-four percent target for 2021. However the BSP is confident that while inflation will settle close to the high end of the inflation target for 2021, it will decelerate near the target-midpoint next year, said BSP Governor Benjamin E. Diokno during Wednesday’s inter-agency Development Budget Coordination Committee hearing at the Senate Committee on Finance.

Diokno said the BSP’s actions and policy thrusts “will continue to pursue appropriate policy actions responsive to the needs of the time” and this includes an accommodative monetary policy stance while the economy is still mending from a recession.

“The BSP will remain vigilant over the current inflation dynamics to ensure that the monetary policy stance continues to support economic recovery to the extent that the inflation outlook would allow,” he told the Senate.

Source: Manila Bulletin (https://mb.com.ph/2021/09/08/tdf-rates-up-bids-lower/?utm_source=rss&utm_medium=rss&utm_campaign=tdf-rates-up-bids-lower)