BSP's TDF auction undersubscribed for the first time

The central bank's term deposit facility (TDF) was undersubscribed on Thursday, the first time since the auction began in June, as banks held on to cash for the holidays.

The short-term six-day tenor was undersubscribed – for the first time since the auction began in June – as the P30-billion offer fetched total bids of P15.865 billion at a weighted average accepted yield of 2.6059 percent.

The bids for the P150-billion, 28-day TDF totaled P113.214 billion, at a weighted average accepted yield of 2.9557 percent.

"There was under subscription at the auction today. Possible reasons include seasonality (banks holding on to cash for the holidays) and the withdrawal of trust accounts from BSP facilities," BSP Governor Amando M. Tetangco Jr., said in a text message to reporters.

"These may have brought down the bid to cover ratio to 0.5288 and 0.7548 for the 6-day and 27-day tenor, respectively," he added.

Thursday's auction also reflected the new and higher weekly amount of P180 billion from P130 billion. The short-term tenor was raised at P30 billion from P10 billion and the longer tenor at P150 billion from P120 billion.

"We see the level of liquidity in the system as still healthy and non-inflationary. We nevertheless remain watchful of external developments that may affect domestic liquidity through shifts in capital flow direction and magnitude," Tetangco said.

The TDF is a central bank tool to manage liquidity in the financial system. During the 30-minute weekly auction that starts at 9:20 a.m., banks and trust entities place a minimum bid of P10 million for the interest rate which the BSP will pay for them to park their excess funds. — VDS, GMA News