Taiwan Bonds Decline for Fourth Day, Currency Rises on U.S. Data

Taiwan’s government bonds fell for a fourth day and the local dollar strengthened after U.S. housing starts rose more than economists forecast, brightening the outlook for the island’s exporters.

The MSCI Asia-Pacific Index (MXAP) of stocks rose by the most in almost three weeks after official data yesterday showed housing starts increased 9 percent to 685,000 in November, exceeding the highest estimate of economists surveyed by Bloomberg News. Taiwan’s Financial Supervisory Commission said yesterday it will let Chinese banks buy stakes in local lenders and financial holding companies, starting Jan. 2.

“Yields are up today as there’s some strong and positive news out there supporting stocks,” said Albert Lee, a Taipei- based fixed-income trader at Cathay United Bank Co. “Yields have room to go up before the end of the year as investors scale back their rate-cut speculation.”

The yield on Taiwan’s 1.25 percent bonds due September 2021, the most-traded government securities, increased one basis point to 1.28 percent, prices from Gretai Securities Market show. Benchmark 10-year rates may rise to 1.3 percent by the end of the year, Lee forecast.

Taiwan will announce its 2012 debt issuance plan on Dec. 23. Eight of 10 economists surveyed by Bloomberg predict central bank Governor Perng Fain-nan and his board will leave interest rates unchanged at 1.875 percent when they review borrowing costs on Dec. 29. Two expect a cut to 1.750 percent.

The Taiwan dollar gained 0.2 percent to NT$30.285 against its U.S. counterpart, according to Taipei Forex Inc. It touched NT$30.210 earlier, the strongest level in a week.

The overnight money-market rate, which measures interbank funding availability, was little changed at 0.398 percent, according to a weighted average compiled by the Taiwan Interbank Money Center.

To contact the reporter on this story: Andrea Wong in Hong Kong at awong268@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net

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