Investors flock to TDF as BSP dangles new tenor

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By Melissa Luz T. Lopez, Senior Reporter

BANKS swarmed the term deposit facility (TDF) yesterday as the central bank started offering a two-week instrument, with the strong demand driving yields lower across all tenors.

Demand for term deposits offered by the Bangko Sentral ng Pilipinas (BSP) reached P150.757 billion, surging from the P140.003 billion received the previous week and hitting nearly double the P80 billion placed on the auction block on Wednesday.

The higher demand came as the central bank introduced a 14-day tenor for the term deposits, starting with a P20-billion offering. The volume was met with P45.46 billion in tenders, which fetched an average yield of 2.8737% as banks wanted returns ranging from 2.7-3%.

Sustained appetite for the week-long and month-long tenors also drove yields down for these instruments.

The P40 billion worth of seven-day deposits saw bids reach P65.362 billion, lower than the P88.573-billion offers received the previous week. Still, the average rate declined to 2.7232% from 2.7278% amid overwhelming demand.

The 28-day term deposits likewise stood oversubscribed yesterday, with banks wanting to place P39.935 billion against the P20-billion on offer. Yields averaged 2.965%, well below the 3.0183% fetched a week ago.

Since June 2016, the TDF has been the central bank’s main tool to capture excess liquidity in the financial system. The window allows banks to park the idle cash they hold under the BSP in exchange for a small margin, which in turn will prompt market rates to inch closer to the three percent benchmark set by the central bank.

Any excess cash which have not been deployed for loans, foreign exchange and debt payments can be parked under the central bank window in order to make small gains, rather than leave these idle inside bank vaults.

Wednesday marked the first time when the BSP introduced the two-week instrument, in response to market preference for shorter-termed instruments.

Sought for comment, BSP Deputy Governor Diwa C. Guinigundo said results of this week’s auction showed that local players continue to hold abundant money supply.

“The oversubscription on all tenors despite the offering of the new 14-day TDF is a clear testimony that the banking system continues to experience substantial liquidity following the sustained return of money to the banks after the holidays and the national government’s RTB (retail Treasury bond) float,” Mr. Guinigundo said in a text message.

“The BSP is also more flexible in considering fast changing liquidity conditions in determining the appropriate volume of liquidity to mop up to help attain price stability while offering more instruments to the capital markets,” the central bank official added.

Mr. Guinigundo has said that banks favor shorter tenors as these lend more “flexibility” in managing funds, versus a month-long lock-in period under the BSP facility.

For next week, the central bank will offer P110-billion worth of term deposits — P50 billion for the seven-day papers, P40 billion for the 14-day tenor, and P20 billion for the 28-day deposits.