Taiwan 10-Year Yield Touches 7-Week High as Fed Expands Stimulus

Government bonds dropped, with benchmark 10-year yields rising to the highest level in seven weeks, after the Federal Reserve said it will expand asset purchases that boost the supply of the greenback.

Taiwan’s dollar strengthened for a third day after the Fed said yesterday it will buy $45 billion a month of Treasuries starting in January, in addition to $40 billion a month of existing mortgage-debt purchases. Global funds bought $801 million more Taiwanese stocks than they sold in the past four days, bringing net purchases this year to $4.9 billion, according to exchange data. The island’s exports rose 0.9 percent in November from a year earlier, official data showed Dec. 7, after dropping in seven of the previous eight months.

“The Fed’s new round of asset purchases boosted risk-on sentiment,” said Sam Chang, a bond trader at Yuanta Securities Co. in Taipei. “But the fact that the Fed keeps pushing out stimulus programs shows the global economic recovery is still in a pretty fragile state. The rise in yields will be limited.”

The yield on the government’s 1.125 percent bonds due September 2022 climbed to 1.144 percent from 1.143 percent yesterday, according to Gretai Securities Market. It touched 1.146 percent earlier, the highest level for benchmark 10-year rates since Oct. 26.

The Taiwan dollar was steady at NT$29.101 against its U.S. counterpart, according to data from Taipei Forex Inc. The currency touched NT$28.959 on Nov. 12, the strongest level since September 2011. It has appreciated 4.1 percent this year, the fourth-best performance among Asia’s 11 most-used currencies tracked by Bloomberg.

One-month implied volatility, a measure of expected moves in exchange rates used to price options, dropped 15 basis points, or 0.15 percentage point, to 3 percent.

The overnight interbank lending rate was 0.387 percent, a weighted average compiled by the Taiwan Interbank Money Center shows.

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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