BSP Adjusts Term Deposit Facility Volume Amid Low Demand

MANILA — The Bangko Sentral ng Pilipinas (BSP) has announced a reduction in the volume of its term deposit facility (TDF) in response to subdued demand, according to a statement released on Wednesday by Deputy Governor Francisco Dakila Jr. The central bank decreased the total TDF offering from PHP340 billion to PHP310 billion, adjusting the allocations for the 7-day and 14-day tenors from PHP180 billion and PHP160 billion to PHP160 billion and PHP150 billion, respectively.

According to Philippines news Agency, the total tenders for the facility amounted to PHP257.394 billion, falling short of the BSP’s anticipated volume range. As a result, the BSP opted to award PHP123.856 billion for the 7-day TDF and PHP129.028 billion for the 14-day tenor due to the undersubscription.

The yield rates for the TDF showed mixed outcomes, with the rate for the shorter tenor increasing by 0.2459 basis points to 6.5871 percent, while the 14-day tenor experienced a slight decrease in its weighted average interest rate by 0.8108 basis points to 6.6106 percent. Dakila noted that the range of accepted yields for both tenors had widened, indicating a variation in market participant interest rates.

He further elaborated on the market dynamics, highlighting that the bid-to-cover ratios for the 7-day and 14-day tenors were 0.783 and 0.880, respectively. This metric underscores the low demand in the current market environment, as participants were likely focused on client withdrawals and loan disbursements.

Dakila reassured the public that the BSP will continue to monitor liquidity conditions and market developments closely to inform its future decisions. The TDF serves as a crucial tool for the BSP in its liquidity management efforts, especially given its inability to issue its own debt instruments. By adjusting the TDF volumes, the BSP aims to align market rates more closely with its policy rate, thereby maintaining stability within the financial system.