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TDF rates are declining despite expectations of a Fed rate hike.

MANILA, Philippines – The rate on the central bank’s term deposit facility (TDF) fell Wednesday, but demand remained strong despite the Federal Reserve’s expected further tightening of key rates.

According to data released by the Bangko Sentral ng Pilipinas (BSP), the average rate for a seven-day facility decreased to 1.9467 percent, while the rate for a 14-day facility increased to 2.0374 percent.

These were 1.9603 percent and 2.0905 percent, respectively, during the March 16 auction for the one-week and two-week facilities.

The BSP maintained the offer volume for the one-week facility at PHP150 billion but reduced it to PHP220 billion from PHP230 billion last week.

The shorter-dated facility received a total of PHP198.738 billion in tenders, resulting in a bid coverage ratio of 1.3249.

Bids for the two-week facility totaled PHP316.107 billion, resulting in a bid coverage ratio of 1.4369.

BSP Deputy Governor Francisco Dakila Jr. stated in a statement that yields accepted for TDF in this week’s auction “shifted higher but remained within a range of 1.8300-2.0000 percent for seven-day TDF and 1.8825-2.1000 percent for 14-day TDF.”

“The auction results reflect the impact of the financial system’s continued normalization of liquidity amid market expectations of gradual Fed tightening,” he said.

However, Dakila stated that the financial system’s liquidity remains ample.

“Monetary policy decisions will continue to be guided by the BSP’s assessment of current liquidity conditions and market developments,” he added.

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