Sat, Aug 04, 2012 - Page 13 News List

Central bank auctions NT$100bn NCDs

By Amy Su  /  Staff reporter

The central bank sold NT$100 billion (US$3.33 billion) of 364-day negotiable certificates of deposit (NCD) at an average interest rate of 0.853 percent at an auction yesterday, it said in a statement.

The 0.853 percent interest rate marked the lowest level since February last year, an indication that domestic financial institutions have been continuing to increase their purchases of NCDs to avoid high-risk equity market investments.

It was also lower than the 0.87 percent interest rate recorded on July 6, the last time the central bank sold a similar amount of 364-day NCDs, the bank’s data showed.

DOWNTREND

The interest rate of 364-day NCDs has been on a downward trend since climbing to 1.054 percent in August last year because of growing hedging demand as the eurozone debt crisis worsens.

The sale yesterday attracted bids for 3.56 times the amount on offer, higher than the 3.19 times recorded last month, providing more evidence of the strong demand from investors, as the local market has been awash in liquidity.

The central bank has been issuing 364-day NCDs continuously following the expiration of the old issuance to drain excess liquidity.

The sale of the instruments since April 2000 was the equivalent of increasing the required reserve ratio by 4.5 percentage points, the bank said.

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