TDF results reflect market positioning ahead of Fed

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AN OVERSUBSCRIBED term deposit facility (TDF) auction on Wednesday indicates the market is positioning ahead of the Federal Reserve rate hikes this year, the central bank said.

It noted the facility remains an appropriate liquidity-mopping tool.

The Bangko Sentral ng Pilipinas (BSP) fully awarded the P180-billion TDF offer. The total bids for the seven- and 28-day facilities exceeded P318 billion. Bids for the seven-day tenor totaled P41.12 billion, while the 28-day facility drew P218.01 billion.

Total bids last week reached over P239 billion.


“Same story: the market continues to position itself against the backdrop of more than one or two US Fed rate hike,” BSP Deputy Governor Diwa Guinigundo told reporters in a text message.

The interest rate for the seven-day facility dropped to 2.9823 percent from 2.9873 percent, while the 28-day tenor fell to 3.3244 percent from 3.3445 percent.

“The decline in interest rates for both tenors continue to indicate ample liquidity competing for limited volume of offering,” Guinigundo said.

He said the BSP does not foresee the need to adjust the P180-billion TDF volume offering at this point.
“As it stands, mopping up by BSP through the TDF remains appropriate and very forward looking, because of the impending US Fed action” he added.

In January, domestic liquidity (M3) or amount of money circulating in the financial system expanded at a slower pace of 12.4 percent to P9.374 trillion.

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