Liquidity migrating to term deposit facility


THE Bangko Sentral ng Pilipinas (BSP) said its term deposit facility (TDF) continues to attract strong demand as the latest auction of seven-day and 28-day tenors remained heavily oversubscribed.

The BSP said it received more than P230 billion worth of bids for the auction of P10-billion seven-day TDFs and P60-billion 28-day TDFs during Wednesday’s auction.

TDFs are among the central bank’s liquidity management tools under the Interest Rate Corridor (IRC) system.

The auction for the seven-day TDF received bids totaling P53.22 billion while the tender for the 28-day TDF received P177.39 billion worth of bids, both at an average yield rate of 2.5 percent.

“While the auction results capture the continuing ample liquidity in the system and the early days of the IRC implementation, the bid to coverage ratio has been coming down,” BSP Deputy Governor Diwa Guinigundo said in a text message to reporters.

This means, he said, that more liquidity is being migrated from ODF (overnight deposit facility) to TDF and those generated outside the BSP.

“When we reach that point of more significant mopping up volume, we expect to see market rates increasingly being guided closer to the BSP policy rate,” Guinigundo explained.

The bid-to-cover ratio for the seven-day tenor of the August 10 TDF auction declined to 5.322 percent from 5.628 percent in the August 3 auction, while the bid-to-cover ratio for the 28-day tenor also declined to 2.957 percent from 2.971 percent the previous auction.

The bid-to-cover ratio compares the number of total bids in an auction with the number of bids deemed acceptable. The higher the ratio, the more that the auction is considered oversubscribed.

At present, the BSP’s reverse repurchase (RRP) facility rate remains at 3.0 percent. Rates on the overnight lending and deposit facilities are at 3.5 percent and 2.5 percent, respectively.

The Monetary Board (MB) is scheduled to announce today (Thursday) its latest monetary policy stance.

Analysts share the view that the BSP will keep its key interest rates steady after the inflation rate stayed at 1.9 percent in July, which is below the 2 percent to 4 percent target range for the year.


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