TDF auction results show financial system is liquid – Tetangco

There is sufficient liquidity in the Philippine financial system as shown by results of the latest Bangko Sentral ng Pilipinas (BSP) term deposit facility (TDF) auction, Governor Amando M. Tetangco Jr. said Wednesday.

According to central bank data, the seven-day, P40-billion tenor attracted total bids of P68.564 billion at a weighted average accepted yield of 3.1918 percent and a bid coverage ratio of 1.7141.

"That means there continues to be sufficient liquidity in the system, particularly for the seven-day tenor because it's oversubscribed again. So there continues to be strong interest in the short end of the curve," Tetangco told reporters on the sidelines of the testimonial luncheon hosted by the Financial Executives Institute of the Philippines (FINEX) in his honor.

The 28-day, P140-billion tenor garnered bids totaling P111.128 billion at a weighted average accepted yield of 3.4760 percent and a bid coverage ratio of 0.7398.

Out of the P180-billion total offer, the BSP awarded P151.128 billion.

"On the 28-day, the interest rate was basically flat relative to last week and I think it was also undersubscribed again," Tetangco said.

"The factors behind this would be the unwinding of trust departments of their placements in the TDF, increased lending by the banks to their corporate clients, and also there were private issues prior to this auction. So some of the funds went to those issues," he added.

The TDF is a central bank tool to manage liquidity in the financial system.

During the 30-minute auction held once a week at 9:20 a.m., banks and trust entities make a bid for the interest rates which the BSP will pay for them to park their excess funds. The minimum placement is P10 million. — VDS, GMA News