THE total bids in the weekly term deposit facility (TDF) auction Wednesday reflected the market preference for the seven-day TDF ahead of a decision by the US central bank on interest rates.
Out of the P180-billion offer, the Bangko Sentral ng Pilipinas (BSP) awarded more than P135 billion.
Bids for the seven-day tenor were oversubscribed at P64.74 billion, prompting the BSP to fully award the P40 billion offer.
But the 28-day TDF was undersubscribed anew, attracting only P95.67 billion. The BSP awarded only P95.27 billion against the P140 billion weekly offer.
The interest rate for the seven-day facility slipped to 3.0648 from 3.0978, while the yield for the 28-day TDF rose to 3.4882 from 3.4814 percent.
“The auction results show banks’ continued preference to stay at the shorter end of the curve in anticipation of the Fed meeting this week, with the oversubscription of the 7-day term deposits,” outgoing BSP Governor Amando Tetangco Jr. said in a text message to reporters.
The Federal Reserve is scheduled to release its policy decision on Wednesday (Thursday in Manila) at the conclusion of a two-day meeting.
Tetangco said the demand for the 28-day TDF decreased as trust units will no longer be able to take part in the TDF auction by June 30.
The Monetary Board set a June 30 deadline for trust entities to stop accessing the TDF and the overnight deposit facility. The move was part of efforts to discourage participants from using the TDF as an investment facility.
Tetangco said the BSP is not considering adjusting the P140-billion TDF volume, but will continue to review the weekly offer.
“So there’s a continuing review. At this point in time, the conclusion is that the amount continues to be appropriate but they can change depending on liquidity conditions of the system,” he said.
“Overall system liquidity appears adequate,” he added.