The central bank from June 1 is to reduce the overall value of the 364-day and two-year certificates of deposit it auctions monthly, as market expectations of higher interest rates have affected its open market operations, it said yesterday.
In response to the banking system’s capital situation and local banks’ asset allocation needs, the monthly auction amount of 364-day certificates of deposit would drop to NT$140 billion (US$4.8 billion) from NT$170 billion, while that of two-year certificates of deposit would decrease to NT$25 billion from NT$60 billion, the central bank said in a statement on its Web site.
The central bank normally sells certificates of deposit of various maturities as part of its open market operations to drain excess liquidity from the banking system. Domestic financial institutions such as banks, credit co-operatives, bills finance companies and state-run Chunghwa Post Co (中華郵政) are major participants in certificate of deposit auctions, it said.
Photo: George Tsorng, Taipei Times
The central bank had last month planned to auction NT$60 billion worth of two-year certificates, but only attracted bids worth a total of NT$5.9 billion, the Central News Agency reported yesterday.
That indicated that local financial institutions have low demand for the central bank’s certificates of deposit at this stage, prompting the bank to adjust its open market operations, market watchers said.
Worldwide, rising inflationary pressures due to a surge in energy prices and a slowing economic growth affected by government measures to curb the spread of COVID-19 have forced global central bankers to cautiously adapt their open market operations and monetary policies, they said.
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