The central bank yesterday sold NT$30 billion (US$95.6 million) in 182-day treasury bills at a yield of 0.55 percent — higher than the 0.5 percent recorded in April’s sales of such bills but lower than the 0.77 percent yield for 182-day certificates of deposit (CD) that were also sold yesterday — indicating that the banking system remains awash in liquidity.
The central bank, which was commissioned by the Ministry of Finance to auction the bills, said that the sale of the 182-day treasury bills maturing on March 30 next year attracted 2.9 times the amount of notes on offer. That compares with 6.73 times the sales of 182-day bonds on April 1.
The bank also said on its Web site that it sold a total of NT$76.8 billion in CDs yesterday, more than the NT$35.1 billion that matured.
PUBLIC DEBT
Proceeds from the auction of treasury bills will be used to help state coffers meet short-term capital needs and finance the government’s debt, the ministry said.
The result of the sales of treasury bills and CDs, coupled with the release on Monday of data showing record-high housing and construction loans last month, is further evidence of excess liquidity that could impact asset prices and may influence the bank when it holds its quarterly policy meeting tomorrow.
“Inflation is not a great concern for Taiwan at the moment and the key is to normalize monetary policy settings to prevent excess credit from creating asset price bubbles,” Tine Olsen, an economist at Moody’s Economy.com in Sydney, said in an e-mailed statement yesterday.
On Monday, the central bank said in a statement that the nation’s outstanding loans for home purchases reached a record level of NT$5.054 trillion. What was worth noticing, however, was that loans offered by local lenders to construction companies totaled NT$1.17 trillion last month, up NT$27.659 billion from the previous month and representing the largest monthly increase so far this year.
Olsen said Taiwan’s recent unemployment and industrial production data paint a rosy picture for the country’s economy and thus warrant another interest rate hike this time.
SMALL INCREASE
“We expect the monetary policy board to raise the discount rate by 12.5 basis points, taking it to 1.5 percent,” she said.
Olsen said if the central bank were to raise its key interest rate, “the rate will still be expansionary and supportive of the real economy, but the central bank is winding back some of its stimulus to prevent overheating.”
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