Taiwan's short-term rates were mixed yesterday on uneven supply with dealers saying the CP market was flush with liquidity because of the expiration of previously issued negotiable certificates of deposit (NCDs). Meanwhile, the repo market tightened from the redemption of funds.
"The banking sector continued to actively seek to park their excess funds in short-term CP in the run-up to the current reserve period which ends Saturday," a dealer with a bills finance company said.
The flush liquidity was reflected in the banks' accumulated reserve excess, which reached NT$183.3 billion as of yesterday.
The high liquidity level must have triggered the Central Bank of China to issue NCDs via open market operations yesterday to offset the return of NT$30.18 billion of funds from expiration of NCDs.
The CBC announced yesterday morning that it will issue NCDs with maturity ranging from 14-days to 6-months at rates ranging between 4.70 percent and 4.95 percent. But the Taiwan Interbank Money Center has yet to announce the results. However, the flush liquidity experienced by the secondary CP market was not felt by the repo sector because of uneven fund supply.
A dealer from a securities brokerage house attributed the squeeze in the repo sector to continued redemption pressure from bond-style and stock-style funds, which are major fund providers to the market.
"We originally thought redemption pressure should be fading today, but that apparently was not the case," said the dealer.
He said this was because insurance companies and electronics companies which are the major fund investors had to withdraw their money for compensation payouts to their clients and facility repairs, respectively.
Dealers expect such an uneven fund supply to continue to Friday.
Late in the morning, the average overnight rate stood at 4.838 percent, higher than Wednesday's close of 4.831 percent, but lower than 4.850 percent recorded earlier yesterday morning.
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