TDF yield inches down as demand stays strong

THE BANGKO SENTRAL ng Pilipinas’ (BSP) one-week term deposits fetched a slightly lower average accepted yield on Wednesday as still-high market liquidity boosted demand for the papers despite the ongoing market volatility.

Bids for the BSP’s seven-day term deposit facility (TDF) amounted to P84.714 billion, exceeding the P70 billion it placed on the auction block. However, this was below the P103.226 billion in tenders seen for a P80-billion offer last week.

This was equivalent to a bid-to-cover ratio of 1.2102 times, lower than the 1.2903 seen a week earlier.

Still, the central bank made a full P70-billion award of its offering.

Accepted rates were from 4% to 4.249%, a tad narrower than the 4% to 4.25% margin in the previous auction. With this, the weighted average accepted yield slipped by 0.23 basis point (bp) week on week to 4.2308% from 4.2331%.

“The still marginally lower seven-day BSP TDF average auction yield still reflects relatively excess peso liquidity in the financial system,” Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said in a Viber message.

He noted that the average accepted yield remained below the BSP’s key overnight rate of 4.25%.

This result came amid volatility in global and local financial markets that has caused investors to shift to safer assets, Mr. Ricafort said.

He added that the recent correction in global crude oil prices may have also led to the lower yields.

Based on the latest BSP data, domestic liquidity rose by 8.6% to P19.711 trillion in January, the fastest growth recorded in about five years or since the 9.5% in February 2021.

Meanwhile, the ongoing US-Israel war on Iran continues to jolt markets as trade disruptions triggered major oil shocks globally.

US President Donald J. Trump had threatened to bomb Iran’s power plants if it did not fully reopen the Strait of Hormuz within 48 hours, but later postponed their plan for five days amid an ongoing resolution deal with Iran.

However, Iranian foreign ministry officials denied that such talks took place.

Iran has blocked the Strait of Hormuz, a critical transit point for about a fifth of the world’s oil supply, against the US, Israel and their allies, endangering major net oil importers like the Philippines.

The war’s growing fallout also prompted President Ferdinand R. Marcos, Jr. to declare a state of national energy emergency in the Philippines amid worries over the country’s fuel supply.

The central bank uses the TDF and BSP bills to mop up excess liquidity in the financial system and better guide market rates towards the policy rate.

The BSP last auctioned off both the seven-day and 14-day deposits on Oct. 29. It has not offered 28-day term deposits for over five years to give way to its weekly offerings of securities with the same tenor. — Katherine K. Chan