BSP expects TDF to remain undersubscribed until Jan

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THE central bank expects its term deposit facility (TDF) auctions to remain undersubscribed until January next year as banks make sure they have enough liquidity to meet clients’ demand for cash during the holidays.

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“[I think] it will be until January, then will normalize in February,” Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa Guinigundo told reporters during the BSP Christmas lighting ceremony late Thursday.

On Thursday, the BSP awarded just over P129 billion worth of term deposit instruments at the auction, well below the P180 billion that government offered, after failing to draw enough bids likely on seasonal factors and the impact of regulatory restrictions on trust entities’ access to government deposit facilities as investment outlets.

BSP Governor Amando Tetangco Jr. said the central bank will keep the TDF volume offer in the P180 billion range for now.

“We will see later if there is a need to adjust. It depends on the liquidity condition,” he told reporters.

“But right now, because it’s Christmas season, the banks would want to have a sufficient liquidity buffer so that in case there is a sudden demand from their clients, they can immediately respond to that,” he added.

The BSP governor earlier said that the level of liquidity in the system remains healthy and non-inflationary.
“We nevertheless remain watchful of external developments that may affect domestic liquidity through shifts in capital flow direction and magnitude,” he said.

The TDF is a monetary tool to absorb excess liquidity from the system in order to keep interest rates and inflation under control. Through the TDF auctions, the BSP seeks to bring market rates closer to its benchmark rate of 3 percent.

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