P50B awarded at weekly TDF auction

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BSP rejects most of P180-B tenders

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The central bank said it awarded P50 billion of its term deposit facility (TDF) at the Wednesday auction according to target, rejecting most of the total P180 billion tenders received.

Oversubscription to the weekly Bangko Sentral ng Pilipinas (BSP) offers of TDF continued as funds poured in amid uncertainty over whether the US Federal Reserve would offer better yields through a rate hike in the near term.

“This is not unexpected. We will continue to see such oversubscription, with ample liquidity and as the prospect of a Fed hike in the near term remains slim/uncertain,” said BSP Governor Amando Tetangco Jr.

“As I’ve said before we will continue to make refinements to the auction sizes as monetary conditions warrant,” he added.

At the July 27 auction, the BSP awarded P40 billion of the 28-day tenor and P10 billion of the seven-day tenor of the facility used as a liquidity management tool under the central bank’s Interest Rate Corridor.

Total tenders for the seven-day term deposit reached P54.07 billion, way above the P10 billion set for the auction, while tenders for the 28-day deposit hit P131.07 billion, far exceeding the P40 billion target.

The auction was priced at an average of 2.5 percent for both tenors.

Starting August 3, the central bank will accept total tenders worth P70 billion—P60 billion for the 28-day tenor and P10 billion for the seven-day tenor. The BSP last week raised its volume offer for the 28-day tenor from the present P40 billion. It is the second increase in the TDF volume offer since the program began in June.

“Oversubscription for both tenors indicated ample liquidity in the system on account of sustained inflows of foreign capital and foreign exchange receipts from remittances, tourism and business process outsourcing,” BSP Deputy Governor Diwa Guinigundo said.

He said excess liquidity is also indicative of the gradual migration of funds from overnight deposit facility to TDF that the central bank expects will ultimately result in the stronger ability of the BSP to keep liquidity for longer periods for improved liquidity management.

“We also expect that higher public spending on infra and social projects would help recycle funds within the system and reduce aggressive monetary operations,” he said.

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