The Taiwanese money market rates remained stable overall on Thursday. Although the funding environment remained tight, the central bank's decision to keep policy rates unchanged allowed short-term rates to be driven by supply and demand.
Short-term Rates Maintain High Volatility
Interbank lending rates were generally flat, with one to two-week lending rates remaining between 1.42% and 1.435%, with some peaks reaching 1.44%. The overnight rate range stabilized between 0.805% and 0.83%.
Market participants indicated that it is currently difficult to find "new money," but since it is not yet the most tense period at the end of the quarter, banks still have time to adjust liquidity, and short-term rates have not significantly increased.
Central Bank Stands Pat
Taiwan's central bank maintained the discount rate at 2%, making it the eighth consecutive time it was unchanged, in line with market expectations. Simultaneously, the central bank moderately relaxed real estate credit restrictions, increasing the mortgage rate for second homes from 50% to 60%.
Traders noted that the central bank’s policy has not tightened further, causing market rates to be more influenced by funding supply and demand and foreign capital flows.
Tight but Orderly Funding
Due to foreign capital outflows and increased lending demand at the quarter’s end, the banking system's overall funding remained tight. There was an increase in borrowing demand, but most institutions chose to wait and see, avoiding high-cost financing.
Short-term commercial paper rates remained between 1.45% and 1.47%, indicating that funding costs are relatively high.
Stable Operation in the Repo Market
Bond repurchase (RP) rates held steady overall, with government bond RP rates at 1.15% to 1.20% and corporate bond RP rates around 1.43% to 1.49%.
Market participants anticipate that as the central bank subsequently reduces term deposit issuance and the end-of-quarter factors gradually diminish, the funding situation by the end of the month may slightly improve, but short-term rates are expected to remain volatile at high levels.
