By Lee C. Chipongian

The Bangko Sentral ng Pilipinas (BSP) added another P10 billion to its weekly auction of 28-day term deposit facility (TDF) as demand rises for this tenor.

The BSP said they will offer P90-billion total TDF on October 24, up from P80 billion of the last two weeks. The offer size has been steadily increasing back to P100 billion since September 26.

BSP Deputy Governor Diwa C. Guinigundo has said that in previous weeks, there were less excess liquidity to absorb through the facility as banks were lending more to borrowers or buying US dollars for their clients’ requirements.

The 28-day TDF was the only tenor with increased offer or from P10 billion to P20 billion. The 7-day and 14-day will keep its P50 billion and P20 billion volume, respectively, for the October 24 auction.

The TDF is a BSP tool intended for liquidity management, and after two years, have allowed the central

bank to reduce banks’ reserve requirement ratio this year. Slashing the reserves ratio will enable banks to have more funds or liquidity which the BSP said will support economic activity and the capital market development.

The TDF average rates have increased significantly following the BSP’s rate hikes four times in a row. The TDF encourages benchmarks for short-term interest rates closer to the policy rate.

Last Wednesday, the 28-days which was offered at P10 billion, had more bids this week of P21.80 billion compared to the previous P17.76 billion. Average yield was lower at 4.8362 percent from 4.8549 percent last week.

The longest-dated TDF is the only tenor with higher tenders compared to the 7-days and 14-days. All tenors received above-offer bids this week and also fetched lower rates.