Domestic financial institutions have been showing interest in purchasing negotiable certificates of deposit (NCDs) to avoid high-risk stock market investments, according to data from the latest NCD sales.
The central bank sold NT$100 billion (US$3.4 billion) of 364-day NCDs at an average interest rate of 0.805 percent at an auction yesterday, it said in a statement.
The 0.805 percent interest rate marked the lowest level since February last year and was also lower than the 0.829 percent interest rate recorded on Sept. 7, the last time the central bank sold a similar quantity of 364-day NCDs, the bank’s data showed.
Yesterday’s auction attracted bids for 3.47 times the amount on offer, lower than the level of 3.6 times recorded last month, the bank’s statistics showed.
The central bank has been issuing 364-day NCDs continuously, following the expiration of the old issuance, to drain excess liquidity in the market.
The sale of the instruments since April 2010 was the equivalent of increasing the required reserve ratio by 4.5 percentage points, the bank said.
The central bank is forecast to sell NT$30 billion of five-year bonds at an interest rate of 0.883 percent on Monday, with the highest forecast at 0.90 percent and the lowest at 0.875 percent, according to the median estimate of 10 fixed-income traders surveyed by Bloomberg.
In related news, the nation’s foreign exchange reserves amounted to US$397.95 billion as of the end of last month, showing an increase of US$3.73 billion from the figure recorded at the end of August.
Lin Sun-yuan (林孫源), director-general of the bank’s foreign exchange department, said the returns from foreign exchange reserves management were the main factor behind the increase in foreign exchange reserves last month.
In addition, the appreciation of the euro and other major currencies against the US dollar had also made foreign exchange reserves denominated in these currencies worth more in terms of the base currency, the US dollar, Lin said.
The latest data shows Taiwan continues to have the world’s fourth-largest foreign exchange reserves, behind China, Japan and Russia.