Taiwan 10-Year Bonds Advance, Currency Weakens on Growth Concern

Taiwan’s government bonds gained and the local dollar weakened after data showed exports dropped for a fifth month, fueling concern the economy is weakening and boosting demand for safer assets.

Shipments slumped 11.6 percent in July from a year earlier, the biggest drop since January, official data showed yesterday. The statistics bureau cut its 2012 export-growth estimate to 0.07 percent last month from a 2.69 percent gain estimated in May. Taiwan’s neighbor, South Korea, is set to consider cutting interest rates for a second straight month tomorrow, with six out of 16 economists expecting a reduction, according to a survey by Bloomberg News.

“Taiwan’s export situation is very alarming,” said James Wang, a debt trader at Yuanta Securities Co. in Taipei. “That will be a strong force countering any increase in yields.”

The yield on the 1.25 percent notes due March 2022 fell one basis point, the biggest drop in a week, to 1.17 percent, according to Gretai Securities Market.

The Taiex (TWSE) index of shares rose for a third day on speculation central banks from the U.S. to China will take steps to boost growth. Global funds bought $172 million more local stocks than they sold today, after net purchases of $673 million in the last two days, according to exchange data.

The Taiwan dollar slipped 0.1 percent to NT$29.987 against its U.S. counterpart, according to Taipei Forex Inc. It touched a one-month high of NT$29.830 earlier. One-month implied volatility, a measure of exchange-rate swings used to price options, rose eight basis points, or 0.08 percentage point, to 3.70 percent.

The overnight money-market rate was little changed at 0.388 percent, according to a weighted average compiled by the Taiwan Interbank Money Centre.

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

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net

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