The central bank yesterday sold NT$30 billion (US$1.03 billion) in 30-year Treasury bonds, with the interest rate reaching 1.705 percent, marking the lowest level in history for the 30-year debt, according to a bank statement.
The yield of 1.705 percent was lower than the 1.738 percent of the similar-maturity debt the central bank sold in August, but higher than the median estimate of 1.703 percent in a Bloomberg survey of fixed-income traders.
In yesterday’s 30-year bonds sale, the bid-to-cover ratio, an indication of demand, was 1.57. In comparison, the bank’s Aug. 21 sale of 30-year bonds attracted bids for 1.4 times the amount of debt on offer, the bank’s data showed.
The central bank handled the auction of Treasury bonds on behalf of the Ministry of Finance, which will start issuing the bonds on Friday to finance debt repayments and public infrastructure construction.
Domestic financial institutions participating in yesterday’s auction put up a total of NT$47 billion worth of funds to bid for the NT$30 billion bonds, with the securities sector accounting for 41.5 percent of the winning bids, followed by the banking sector at 31.83 percent, the insurance industry at 25.67 percent and the bills finance sector at 1 percent, data from the sale showed.
The NT$47 billion on offer was higher than the NT$42 billion bidders put up in the previous sale, as financial institutions have been continuously increasing their purchases of government bonds to avoid high-risk stock market investments in view of economic uncertainties at home and abroad.
On the other hand, the declining interest rate on the latest offer of 30-year bonds reflected the monetary authorities’ attempts to mop up excess market liquidity.
On Nov. 2, the bank sold NT$100 billion in 364-day negotiable certificates of deposit at an average interest rate of 0.758 percent, the lowest in 21 months, while the yield on 20-year bonds sold by the bank on Oct. 29 dropped to its lowest level ever at 1.58 percent.