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Market favors shorter tenor TDF

Market favors shorter tenor TDF
By Kris M. Crismundo

MANILA (Philippines News Agency) — Bids for the seven-day term deposit facility (TDF) were oversubscribed while the 28-day TDF was undersubscribed during Wednesday’s auction, the Bangko Sentral ng Pilipinas (BSP) has reported.

The BSP offered a total of PHP180 billion TDF on Wednesday — PHP40 billion for shorter tenor and PHP140 billion for longer tenor.

The seven-day TDF had tenders amounting to PHP55.3 billion with an average yield of 3.2468 percent.

The 28-day facility, on the other hand, had bids amounting to PHP127.03 billion with an average rate of 3.4764 percent.

Bid coverage ratio for the shorter tenor was at 1.3826, and the longer tenor at 0.9074.

Since the start of the month, the central bank has hiked the offered amount for the seven-day TDF from PHP30 billion in the April 26 auction.

But for the 28-day facility, the central bank has slashed the offered value from PHP150 billion as undersubscription continued.

Next week, the central bank will offer the same amount for TDF auction.

The TDF is a key liquidity absorption facility, commonly used by central banks for liquidity management. Due to the BSP’s inability to issue its own debt instruments, the TDF will be tasked to withdraw a large part of the structural liquidity from the financial system to bring market rates closer to the BSP policy rate, the central bank explained. (PNA)

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