TDF auction size cut by half
The BSP auction committee decided to cut the volume of the facility by half to P40 billion next Wednesday from yesterday’s P80 billion. This is the fifth time the offer size has been reduced since the TDF was launched in June last year as part of the shift to the interest rate corridor (IRC) framework. File
MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) said the term deposit auction facility (TDF) next week would only offer seven-day term deposits due to tight market conditions as banks prepare for higher demand for cash during the Christmas holidays.
The BSP auction committee decided to cut the volume of the facility by half to P40 billion next Wednesday from yesterday’s P80 billion. This is the fifth time the offer size has been reduced since the TDF was launched in June last year as part of the shift to the interest rate corridor (IRC) framework.
This is the lowest volume since the introductory volume of P30 billion consisting of P10 billion worth of seven-day and P20 billion worth of 28-day term deposits.
For next Wednesday, the BSP is set to offer only seven-day term deposits worth P40 billion.
BSP Deputy Governor Diwa Guinigundo said TDF offerings are based on 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,” he said.
Guinigundo exsaid authorities are mopping up lower excess liquidity in the financial system.
“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 said.
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