28-day TDF still undersubscribed despite cut in volume offering

Even as the Bangko Sentral ng Pilipinas (BSP) already reduced the volume of the 28-day term deposit facility (TDF) it offered Wednesday, the tenor remained undersubscribed.

For the one-month TDF, banks tendered only P84.415 billion, which the BSP all accepted, despite the P110-billion offering.

It was the initial auction wherein the BSP offered a lower volume from P140 billion previously.

The bids for the 28-day term deposits were accepted at a yield of between 3.45 percent and 3.5 percent.

The seven-day TDF, meanwhile, was oversubscribed, with P42.918 billion in tenders for the P40-billion offering, which the BSP all awarded.

The accepted yield was within the range of 3.2-3.398 percent.

Next week, the BSP will also offer a total of P150 billion in TDF, down from the P180-billion volume being offered until last month.

Last week, BSP Deputy Governor Diwa C. Guinigundo explained that they decided to slash the volume of the 28-day TDF to be offered moving forward “based on the recognition that the sustained economic expansion has also given rise to higher demand for credit.”

“Banks are now lending more to their clients instead of placing their excess funds with the BSP. Corporates are also using their peso funds in the banks to buy foreign exchange for their import requirements; some of them have also been investing outside the Philippines. Some are prepaying their external obligations. Thus, it is the excess liquidity of the banks that has declined recently and not the domestic liquidity per se. The BSP, therefore, does not have to do as much mopping up as before because funds are being used for productive uses instead of just being parked with the BSP,” according to Guinigundo.

Launched in June last year, the weekly TDF auctions form part of the BSP’s implementation of the interest rate corridor aimed at bringing market rates closer to the policy rate of 3 percent by mopping up excess liquidity.