NT$ bonds issued by foreign banks hit new high of NT$45 B. in 2003

Dec 04, 2003 Ι Industry In-Focus Ι Furniture Ι By Judy, CENS
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Taipei, Dec. 4, 2003 (CENS)--The New Taiwan dollar-denominated bonds issued in Taiwan by international financial institutions hit a record high of NT$45 billion (US$1.32 billion at US$1 = NT$34) this year, according to the statistics compiled by the Central Bank of China (CBC) in Taiwan.

CBC said that the bonds issued in Taiwan by international financial institutions have been increasing, particularly in the past several years. The total value of the bonds this year saw a whopping rise of NT$19 billion (US$558.8 million) from last year's NT$26 billion (US$764.7 million).

Market observers noted that the recent active fund-raising activities by foreign banks have reflected a capital-abundant monetary market in Taiwan, and can serve to help expand and internationalize the local bond market.

CBC officials indicated that foreign bond issuers have yet to fully understand CBC's regulations on the issuance of bonds. They might misunderstand that CBC would not allow them to issue bonds here based on foreign currencies other than N.T. dollar. In fact, the financial laws here do not ban foreign institutions from issuing bonds in Taiwan in foreign currencies. However, over the past 10 years, foreign financial institutions haven't issued bonds in foreign currencies in Taiwan.

Insiders disclosed that some banks preferred purchasing the N.T. dollar-denominated bonds because they could calculate the purchased NT dollar-denominated bonds as part of their banking reserves. Besides, foreign issuers could convert the N.T. dollars they raised in the market here into foreign currencies they needed via cross currency swap (CCS) system.

In 1991-1993 the Asia Development Bank (ADB) once floated bonds in Taiwan in the U.S. dollar and the Japanese yen, but the bank changed its policy in 1995 and has since issued bonds here in the N.T. dollar.


Financial experts observed that due to the stable net worth of corporate bonds, most operators of Taiwan's bond funds preferred corporate bonds to government bonds. This has made the interest rates of corporate bonds lower than those of government bonds. Moreover, the prices offered by CCS usually surge along with the prices of government bonds. With these two factors, international financial institutions can raise funds in Taiwan at interest rates 20-30 basic points lower than in other international financial markets. Accordingly, more international financial institutions are expected to issue bonds in Taiwan next year.

N.T. dollar-denominated bonds issued in Taiwan by international financial institutions (2001-2003)

Year

Issuing Banks

Total Value (NT$B.)

2001

Inter-American Development Bank

12

European Investment Bank

16

European Bank for Reconstruction & Development

4

2002

European Investment Bank

7

Inter-American Development Bank

10

European Bank for Reconstruction & Development

4

Nordic Investment Bank

5

2003

Nordic Investment Bank

11

Asian Development Bank

5

European Investment Bank

25

European Bank for Reconstruction & Development

4

Source: CBC

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