Taiwan's central bank has been issuing fewer negotiable certificates of deposit, which means it has been siphoning off less cash from banks. By Sept. 24, the run hit 16 consecutive days, leaving an extra NT$1.02 trillion in the system according to Bloomberg's data set that stretches to 2002. Total NCDs outstanding slid to NT$5.67 trillion, a level last seen in 2009.
Demand for credit is running hot. Central bank data indicate that in August the yearly expansion of loans plus investments at monetary institutions quickened to 9.43%, the highest pace since 1998. Add a strong stock market to the mix and liquidity gets squeezed. Taiwan's artificial intelligence upswing is a big driver too, with supply chain firms stepping up capacity spending that needs financing. By pulling out less cash, the central bank can keep banks' day to day funding conditions more comfortable while that demand builds.
A central bank official said Wednesday the smaller NCD sales reflect solid corporate borrowing tied to capital expenditure. At ING Bank NV, Lynn Song - the chief economist for Greater China - said some companies were saying "that liquidity was actually tighter than expected, and many still needed funding due to outward investment plans." "This may be to address short-term liquidity conditions."
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More cash left in banks points to easier day to day funding for lenders even as credit demand and a buoyant stock market strain liquidity. If you track Taiwan's AI supply chain or its financials, the backdrop here is simple: companies are borrowing more for expansion, and the central bank is making sure the pipes stay unclogged.
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