Sun, Aug 07, 2011 - Page 11 News List

Central bank foresees no impact on bondholdings

Staff Writer, with CNA

The downgrade of US credit ratings by Standard & Poor’s has no impact on the bond portfolio held by Taiwan’s central bank, a senior banker said yesterday.

Central bank Deputy Governor Chou A-ting (周阿定) made the comments after S&P revised downward the US credit rating by stripping Washington of the “AAA” status and assigning “AA+,” which is still strong, but not the highest.

S&P said the newly approved US debt plan was short of measures to “stabilize the government’s medium--term debt dynamics.”

Chou said despite the downgrade by S&P, two other major credit ratings agencies — Moody’s and Fitch — have maintained their “AAA” status for the US credit rating.

PRICES RISE

Chou said as US bonds remain liquid and prices are still on the rise, the central bank has no immediate plan to adjust its US bond holdings.

Taiwan is among the largest foreign holders of US bonds. In the portfolio of its huge foreign exchange reserves are a big chunk of them.

The private sector also owns many US bonds. The central bank declined to reveal the details of its investment portfolio.

At the end of last month, Taiwan remained the world’s fourth-largest foreign exchange reserve holder, behind China, Japan and Russia, with a value of US$400.77 billion.

DEFAULT UNLIKELY

Foreign reserves grew US$440 million from the end of June.

It was the first time the US lost its highest “AAA” credit rating since Moody’s first assigned the top status to the country in 1917.

Chou said since the US Congress had approved a bill to raise the debt ceiling, it was unlikely that Washington would default on its debt.

DON’T PANIC

He called for local investors not to overreact or panic after the downgrade by S&P.

Chou assured the public that the central bank was paying a lot of attention to the stability of its foreign-exchange investments.

In the long run, Chou said, the central bank would continue to monitor changes in the international financial markets.

It would also make necessary adjustments in its investment portfolio, Chou said.

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