The central bank yesterday auctioned NT$100 billion (US$3.44 billion) in 364-day certificates of deposit (CDs), marking its 18th such sale in 17 months, as it seeks to absorb excess funds in the market.
The auction yielded an average interest rate of 0.995 percent with a bid-to-cover ratio of 3.14 times, the central bank said in a statement. That compared with an average interest rate of 1.054 percent in the previous CD sales on Aug. 5, which had a bid-to-cover ratio of 2.65 times.
The bank did not comment on the lower average yield in the latest 364-day CD sale, despite market speculation it could indicate the bank might take a neutral stance on monetary policy during its board meeting later this month.
The bank has raised its key interest rates for five straight quarters since June last year, bringing the discount rate to 1.875 percent. However, the chances are increasing of a rate pause at the Sept. 29 meeting, Cheng Cheng-mount (鄭貞茂), chief economist at Citigroup, said in a research note on Monday.
The central bank’s CDs are issued to eligible financial institutions, including commercial banks, credit cooperatives, trust investment firms, bills finance companies and Chunghua Post Co (中華郵政) as a way to absorb excessive reserves.
The bank, which now has NT$1.2 trillion in outstanding 364-day CDs, said its sale of such instruments since April last year was the equivalent of increasing the bank reserve requirement ratio by 4.5 percentage points.
The bank will issue the new certificates on Tuesday, it added.
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