Banks flock to TDF auction anew

Banks again swarmed around the Bangko Sentral ng Pilipinas’ term deposit facility (TDF) auction Wednesday, with tenders reaching P156.8 billion for the fully awarded P30-billion offering.

The total bids at this week’s TDF auction were lower than last week’s P199.7 billion, although both the seven-day and 28-day term deposits were oversubscribed, indicating significant liquidity in the system.

The BSP awarded all P10 billion in seven-day term deposits, in which banks tendered P63.9 billion.

The P20-billion 28-day facility, meanwhile, had bids totaling P92.8 billion.

Both had a yield of 2.5 percent, similar to the rate a week ago.

On June 22 and 29, the BSP would also  be offering seven-day term deposits amounting to P10 billion and 28-day facilities worth P20 billion.

Last week, BSP Governor Amando M. Tetangco Jr. said the central bank “will make adjustments to the amount of the TDF auctions as conditions warrant.”

“We expect that as the banks become more familiar with the facility, and the TDF auction amounts become refined, we shall see rates gradually move toward the BSP policy rate,” Tetangco had said.

The term deposits were being auctioned off under the interest rate corridor (IRC), aimed at mopping up excess liquidity and tempering volatility in market rates by moving them towards the policy rate of 3 percent.

The BSP earlier made “operational” adjustments ahead of the implementation of the interest rate corridor (IRC) last June 3.

The overnight lending facility—the upper bound of the corridor—was cut to 3.5 percent from the former repurchase (RP) facility of 6 percent, while the policy rate or reverse repurchase (RRP) facility had been converted into overnight, with its rate cut to 3 percent from the previous RRP facility of 4 percent.

The BSP kept the overnight deposit facility or the former special deposit accounts (SDA) rate of 2.5 percent, which served as the lower bound of the corridor.

The TDF was being auctioned off using variable-rate, multiple price tenders through the BSP’s IT platform called Monetary Operations System (MOS).