BSP cuts 7-day TDF offer to P40B

The Bangko Sentral ng Pilipinas further reduced its term deposit facility (TDF) offering to a mere P40 billion of the shorter seven-day tenor on expectations of higher cash demand from bank customers amid the holidays.

The TDF auction Wednesday was undersubscribed as banks tendered P38.92 billion for the P40 billion in seven-day offering. The BSP awarded the one-week term deposits at 3.375-3.5 percent.

The P40-billion 28-day facility, meanwhile, generated P33 billion in bids, which the BSP accepted at 3.475-3.5 percent.

After slashing to P80 billion the TDF offering during the first two weeks of December from P130 billion in November, the BSP again cut to P40 billion the volume to be auctioned on Dec. 20.

“TDF offerings are based on our careful liquidity forecasts. Our numbers suggest that banks continue to lend more, buy foreign exchange for imports, debt servicing and foreign investments. Hence, they have sustained demand for funds that would translate to lower excess demand in the system. It follows that the BSP should trim its open market operation lest we see tight market conditions,” Deputy Governor Diwa C. Guinigundo said in a text message to reporters.

On retaining the shorter tenor, Guinigundo explained that banks continued to demand very short-term instruments like the seven-day TDF to allow them greater flexibility in servicing the needs of their clients and deploying the rest of their funds.

“Banks have higher demand for funds due to the long holidays,” Guinigundo noted.