LOWER BIDS. Banks submitted bids that were lower than the offer volume for the Bangko Sentral ng Pilipinas' (BSP) term deposit facility (TDF) on Tuesday (Nov. 29, 2022). BSP Deputy Governor Francisco Dakila traced this to banks' decision to hold on to their cash ahead of the holiday. (Photo courtesy of the BSP)

MANILA – Further increase in interest rates, along with banks’ decision to keep their cash ahead of the holidays, resulted in the undersubscription in the central bank’s term deposit facility (TDF) on Tuesday.

The Bangko Sentral ng Pilipinas (BSP) lowered the offering for the eight-day facility, auctioned a day earlier than the original seven-day tenor due to the Bonifacio Day holiday on Wednesday, to PHP180 billion from last week’s PHP200 billion.

Bids amounted to PHP111.737 billion, which the central bank fully accepted and awarded.

The average rate of the one-week TDF rose to 5.7514 percent from 5.4921 percent during the auction last Nov. 23.

The rate of the 15-day facility also rose to 5.8662 percent from last week’s 5.6635 percent.

It was offered for PHP150 billion, lower than the PHP160 billion offer last week.

Tenders reached PHP121.732 billion, which the BSP fully awarded.

In a statement, Bangko Sentral ng Pilipinas (BSP) Deputy Governor Francisco Dakila Jr. said bids submitted in this week’s TDF auction are below their expected range of tenders.

Dakila traced the upticks in the facility’s interest rates to the similar path of the central bank’s key policy rates, which were hiked anew by 75 basis points recently as inflation rate remained elevated and to ensure interest rate differential following another 75 basis points increase in the Federal Reserve’s policy rates last Nov. 2.

“In addition, the undersubscription could be attributed to eligible counterparties’ increased preference for cash in preparation for the holidays. Going forward, the BSPs monetary operations will remain guided by its assessment of the latest liquidity conditions and market developments,” he added. (PNA)