Taiwan 10-Year Yield Drops to One-Week Low as Inflation Eases

Taiwan’s government bonds gained, pushing the benchmark 10-year yield to a one-week low, as inflation slowed for a third month. The local dollar climbed after foreign funds pumped money into the island’s stocks.

Consumer prices rose 1.59 percent in November from a year earlier, the least since April, according to an official report released today. The median estimate in a Bloomberg News survey was for a 2.04 percent increase. The central bank has held its benchmark interest rate at 1.875 percent since June 2011 and will review policy again on Dec. 19.

“Inflation fell below the benchmark rate for the first time in quite a while,” said Eric Hsing, a fixed-income trader at First Securities Inc. in Taipei. “The central bank will probably keep interest rates unchanged next month.”

The yield on the government’s 1.125 percent bonds due September 2022 was 1.132 percent, compared with 1.134 percent yesterday, according to Gretai Securities Market. That’s the lowest level for the benchmark 10-year rate since Nov. 28.

Global funds bought $59 million more Taiwanese stocks than they sold yesterday, taking net purchases in the last four days to $1.2 billion, according to exchange data.

Taiwan’s dollar rose 0.1 percent to NT$29.079 against its U.S. counterpart, based on Taipei Forex Inc. prices. One-month implied volatility, a measure of expected moves in exchange rates used to price options, advanced eight basis points, or 0.08 percentage point, to 3.30 percent.

The overnight interbank lending rate was steady at 0.385 percent, according to a weighted average compiled by the Taiwan Interbank Money Center.

To contact the reporter on this story: Andrea Wong in Taipei at +886-2-7719-1579 or awong268@bloomberg.net

To contact the editor responsible for this story: James Regan at +852-2977-6620 or jregan19@bloomberg.net

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