BSP scraps 28-day TDF offering for Dec. 20 auction

December 13, 2017 - 9:44 PM
Bangko Sentral ng Pilipinas
The BSP's main building on Roxas Boulevard, (Reuters file photo)

MANILA – The Bangko Sentral ng Pilipinas (BSP) will not be offering the 28-day Term Deposit Facility (TDF) during the auction on Dec. 20 as it continues to be less attractive to banks.

Data released by the central bank Wednesday showed that only the seven-day facility will be offered for PHP40 billion in next week’s auction.

This week, both tenors received bids that are lower than the PHP40 billion offering.

BSP data show that the short-dated TDF attracted PHP38.92 billion worth of tenders, also lower than last week’s PHP41.269 billion bids.

This resulted in the drop of bid coverage ratio to 0.9730 from last week’s 1.0317.

Its rate, meanwhile, improved to 3.4542 percent from last week’s 3.4171 percent.

Tenders for the 28-day facility this week totaled PHP33.015 billion, higher than last week’s PHP32.84 billion.

This resulted in the hike of its bid coverage ratio to 0.8251 from 0.8210 last week.

However, its rate slipped to 3.4954 percent from the previous week’s 3.4940 percent.

BSP Deputy Governor Diwa Guinigundo attributed the lower bids in this week’s TDF auction to the banks’ higher demand for liquidity in line with the holidays.

He also explained that “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 into lower excess demand in the system,” he said.

The central bank officials, thus, pointed out that “it follows that the BSP should trim its open market operation lest we see tight market conditions”.

“Banks continue 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,” he added.