Seasonality dampens last TDF auction of 2016


The P180-billion term deposit facility (TDF) again failed to draw enough bids for the longer tenor during the last auction for the year as seasonal factors continued to weigh on the weekly auction.

Rajiv Biswas, Asia-Pacific chief economist for IHS Markit said the undersubscription likely reflected several factors, “including seasonal factors as banks retain high levels of cash to provide liquidity for the holiday season over Christmas and New Year, as well as the implementation of a phased transition toward new regulations that will restrict trust accounts from BSP deposit facilities.”

During Wednesday’s auction, the Bangko Sentral ng Pilipinas (BSP) awarded just more than P140 billion.

Bids exceeded the P30 billion worth of seven-day tenor, reaching P37.80 billion, with the offer fully awarded.

However, bids for the 28-day facility totaled only P111.03 billion —short of the P150- billion offer. The BSP awarded P110.16 billion.

The interest rate for the seven-day facility rose to 3.04 percent from 3.02 percent, while that of the 28-day tenor rose to 3.46 percent from 3.43 percent.

Biswas said the seasonal factors should fade out in early 2017 and help improve the subscription take-up in the first quarter.

The central bank retained the P180-billion TDF offer in the first two auctions of 2017 on January 4 and 11, at P150 billion for 28-day facility and P30 billion for seven-day tenor.

“As to the offered amount, the BSP continues to monitor the level of liquidity in the system and has the flexibility to change the volume it will offer for the TDF depending on the needs of the financial system,” BSP Governor Amando Tetangco Jr., said in a text message to reporters

The TDF is a key liquidity absorption facility commonly used by central banks for liquidity management. The BSP cannot issue its own debt instruments, but the TDF can siphon a large amount of structural liquidity off the financial system to bring market rates closer to the BSP policy rate.


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