‘TDF auction levels becoming sustainable’

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The central bank on Thursday said it is moving toward a sustainable term deposit facility (TDF) auction levels following the decline of the latest auction’s bid-to-cover ratio.

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Data from the Bangko Sentral ng Pilipinas showed that the bid-to-cover ratio for the six-day tenor of the July 7 TDF auction declined to 6.025 percent from 6.138 percent in June 29’s auction.

The bid-to-cover ratio of the 27-day tenor also declined to 4.056 percent from 4.598 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 auction is considered more aggressive or ‘oversubscribed’. In the case of the BSP TDF auction, a lower ratio would indicate that fewer bids are being rejected.

“The bid-to-cover ratio in both tenors in today’s auction declined. This indicates we are moving towards more sustainable auction levels,” BSP Governor Amando Tetangco Jr. said in a text message to reporters.

That said, Tetangco stressed, “There is still room for further refinement to achieve a smooth convergence between supply and demand in the market.”

“We will continue to monitor developments and market conditions to see how we can achieve this,” he added.

Meanwhile, the BSP awarded P50-billion worth of its TDF—P10 billion in the six-day tenor and P40 billion in the 27-day tenor—rejecting most of the over P200 billion tenders for the liquidity management tool under the Interest Rate Corridor.

Of the total tenders, P60.25 billion was for the six-day term deposit, and P162.23 billion for the 27-day term deposit—far exceeding the P10 billion and P40 billion set respectively for the auction.

The offer was oversubscribed with the auction priced at an average of 2.5 percent for both tenors.

Tetangco said the results showed that there is ample liquidity in the system.

“The same is confirmed by the latest figure on M3 which still shows healthy growth,” he said, referring to the 13.5 percent growth in domestic liquidity in May.

Meanwhile, BSP Deputy Governor Diwa Guinigundo said the oversubscribed TDF auction means that foreign funds are coming in and that adds to domestic money supply.

“Domestic credits continue to expand. That also means the government can truly leverage on excess liquidity and fund infra projects with local funds,” he said.

With inflation low and stable, interest rates remain favorable so that investments and public spending can be undertaken at manageable cost, he added.

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