Investors are looking for longer TDF terms; BSP refers to the use of coins

According to the latest figures from Bangko Sentral ng Pilipinas (BSP), the upcoming holiday may have spooked investors as the results of the time deposit (TDF) auction favored longer terms.

BSP kept the offer volume for TDF at 280 billion pesos compared to last week’s offer with a reallocation of 170 billion pesos from 150 billion pesos and 110 billion pesos from 130 billion pesos for 7-day and 14-day periods respectively.

Subscription to the 7-day TDF was insufficient and 0.86 times the amount offered was received. Meanwhile, the 14-day TDF subscription was oversubscribed, with bids exceeding the offer by 1.36 times.

“The TDF auction results reflect market participants’ preference for a longer term BSP deposit ahead of All Souls’ Day amid ample liquidity in the financial system. Going forward, BSP’s monetary operations will continue to be guided by its assessment of recent liquidity conditions and market developments,” said BSP Deputy Governor Francisco J. Daquila Jr. said.

The BSP reported that the total trading volume was 295.251 billion pesos, which is within the expected supply volume of the central bank.

Weighted average interest rates (WAIR) for both terms continued to rise compared to the rates last week.

WAIR for the 7-day period increased by 10.5329 basis points to 4.8146 percent and for the 14-day period rose by 14.3338 basis points to 4.9044 percent.

The yield taken in both tenors increased and widened to a range of 4.65 to 5 percent in the 7-day TDF, but narrowed to a range of 4.55-5 percent in the 14-day TDF.

Accepted transactions

LAST Wednesday, BSP reminded the public that the coins currently in circulation must be accepted as payment or change in cash transactions.

All denominations (e.g. 1-, 5-, 10- and 25 centimos; 1-, 5-, 10- and 20-pisos) of the BSP coin series and the new generation currency coin series are legal tender and can be used as payment goods and services.

Under BSP Circular 537 (2006 series), 1, 5 and 10 peso coins can be used as payment for amounts not exceeding 1000 pesos; and coins of 25 centimes and lower denominations for amounts not exceeding 100 pesos.

BSP is currently updating a circular on the legal tender limit for the 20 peso coin. Meanwhile, the public can also use the 20 peso coin or banknote for payment transactions.

“This notice is in line with BSP’s broader efforts to promote efficient coin recycling. Inefficient circulation of coins hinders the use of coins as a medium of exchange, and may also cause an artificial shortage of coins in certain places,” the BSP said in a statement.

Meanwhile, the efficient circulation of coins leads to lower production costs due to the minting of fewer coins. BSP encourages the public to continue using their coins as payment for goods and services.