Taiwan's interbank short-term lending rates are fluctuating towards the lower end of the range. As the reserve period enters its final stage, financial institutions have largely adjusted their balances, resulting in a subdued atmosphere in the overall lending market due to tepid demand.
Recently, the Taiwan Weighted Stock Index and other equity markets have experienced significant volatility, prompting some hedging funds and securities firms to return previously borrowed credit lines to banks, temporarily parking them in the money market. This has significantly eased the previously tight funding conditions.
On Friday, the Central Bank of Taiwan will see the maturity of NT$140 billion in one-year certificates of deposit, while the new issuance of the same amount will be delayed until next Monday. This timing gap is expected to release short-term liquidity, further easing market conditions towards the end of the period.
Interbank Market Supply and Demand Returns to Calm
As the end of the reserve period approaches, trading demand in Taiwan's interbank lending market has noticeably shrunk. With major banks having adjusted their balances, many in the market are opting not to renew upon maturity, causing the higher end of lending rates to decline first. Today, the one-week lending rates offered by banks to securities firms have gradually slipped from the previous day's range of 1.57% to 1.60%, moving towards the lower range of 1.56% to 1.58%, presenting a relatively balanced and calm supply-demand situation in the overall funding market.
Stock Market Turbulence Triggers Safe-Haven Capital Inflow
The recent increase in volatility of the Taiwan Weighted Stock Index and other equity assets has indirectly altered the structure of the money market. Some funds that were active in the stock market and certain positions of securities firms have chosen to temporarily withdraw and park in the money market to avoid short-term risks. This phenomenon has not only cooled the demand for high-interest unsecured commercial paper issued by securities firms but also significantly eased the pressure on self-guaranteed paper, further driving short-term paper transaction rates to shift substantially towards the lower end of the range.
Short-Term Paper Transaction Rates Decline from Highs
In the short-term paper market, today's main transaction rate range for 30-day self-guaranteed short-term paper between major securities firms and banks is concentrated between 1.63% and 1.65%, with a noticeable decrease in the proportion of transactions at the higher rate compared to earlier periods. Some major securities firm traders noted that the day's transaction rate high has slightly decreased from the previous 1.65% to 1.64%. As the end of the reserve period is smoothly navigated, the ample funding conditions are expected to continue to gently push short-term paper rates lower in subsequent trading days.
Repo Market Rates Vary Due to Bond Type Differences
In the bond repurchase (RP) market, the overall funding supply from investment trusts and banks is relatively abundant, with RP transaction rates gradually returning to normal monthly average levels. The RP rates for government bonds handled by securities firms and financial institutions mainly remain in the range of 1.20% to 1.25%; due to differences in bond types and maturities, corporate bond RP rates fluctuate mainly between 1.45% and 1.54%, while interbank transaction rates are roughly stable at the previous day's 1.61% to 1.62%.
