THE term deposit facility (TDF) auction was oversubscribed anew on Wednesday as banks’ appetite for the longer tenor returned, the central bank reported.
The Bangko Sentral ng Pilipinas (BSP) fully awarded the P180-billion TDF. Total bids for the seven- and 28-day facilities reached over P240 billion.
Bids for the seven-day tenor totaled P43.66 billion, while the 28-day facility garnered P199.73 billion.
“Today’s TDF auction results were more along what is expected, as the relatively heavy funding requirements reported last week were no longer present this week,” BSP Governor Amando Tetangco Jr. told reporters in a text message on Wednesday.
The interest rate for the seven-day facility dropped to 3.02 percent from 3.04 percent, and for the 28-day tenor rose to 3.43 percent from 3.41 percent.
“Right now we don’t see any need to make any adjustments to our market operations but we will continue to monitor market liquidity conditions,” Tetangco, however, said.
Because of the BSP’s inability to issue its own debt instruments, the TDF is meant to lessen structural liquidity from the financial system and bring market rates closer to the BSP’s 3-percent policy rate.
“We continue to see a liquid market for TDF. Bid-to-cover ratios for both tenors are above 1 although the oversubscription for 7 day tenor declined moderately compared to the reversal from undersubscription to oversubscription for the 28 day tenor,” BSP Deputy Governor Diwa Guinigundo said in a separate text message.
“While the weighted average interest rate for the 7 day tenor dropped slightly, the cut-off rate was the same this week compared to last week’s. In the case of the 28 day tenor, notwithstanding the oversubscription, the weighted average interest rate actually increased,” he added.
Based on these trends, Guinigundo said the central bank see the clear preference of the market for shorter dated placements and therefore their willingness to bid a little lower.
In turn, this preference for the short-term continues to be driven by the prolonged uncertainty in the US political and economic dynamics and the widely expected three interest rate hikes by the US Fed even as both Europe and Japan may continue to have an accommodative monetary policy, he said.
“We also continue to monitor developments in the external market so we decided to keep our volume of offerings steady,” he added.