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BSP lowers TDF volume for retail bond issuance

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THE BANGKO Sentral ng Pilipinas (BSP) reduced the offer volume for the one-week term deposit facility (TDF) auction next week to make way for the government’s retail Treasury bond (RTB) issuance.

The central bank is seeking to get P40 billion on the seven-day tenor for Wednesday’s auction, lower than the P50 billion it offered in the May 30 TDF auction.

The offers for the 14- and 24-day tenors, meanwhile, were kept at P40 billion and P20 billion, respectively, making the total offer at P100 billion.

The seven-day TDF was the only tenor undersubscribed in last week’s auction, attracting only P48.206 billion from depositors. They also fetched an average 3.693% yield, 10.6 basis points higher than the rate a week ago.

“The 7-day undersubscription may be due in part to month-end requirements as well as initial preparations for the 3-year retail treasury bonds that the [national government] will be offering on 30 May — 8 June 2018,” BSP Governor Diwa C. Guinigundo said in a mobile phone message to reporters late Wednesday.

The TDF auction is the BSP’s tool to capture excess liquidity in the financial system.

“This is consistent with previous observation that banks seem to use the funds that they have allocated for the 7-day TDF for their liquidity management. Thus, even as more funds went into the 14 and 28 day TDFs and the BSP slightly reduced the volume…banks demanded higher rates due to alternative RTB issue coming up in days,” Mr. Guinigundo added.

During the price-setting auction on Wednesday, the Bureau of the Treasury (BTr) raised P66 billion in the three-year RTBs, more than double the P30 billion it initially offered. The papers fetched a 4.875% coupon rate, with banks’ bids reaching P92.8 billion, more than thrice the offer size.

The RTBs are offered to the general investing public through local banks until June 8, with a minimum investment of P5,000, and multiples of the same amount thereafter.

The latest debt papers will be issued on June 13, and will mature in 2021. — Elijah Joseph C. Tubayan