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Taiwan Bond Yields Rise to 2-Month High on U.S. Budget Optimism

Taiwan’s government bonds dropped, pushing the 10-year yield to a two-month high, as optimism U.S. lawmakers will agree on budget revisions tempered demand for safer assets. The local dollar was steady.

President Barack Obama is considering a concession on cost- of-living increases for Social Security and House Speaker John Boehner dropped his opposition to raising tax rates for some top earners, two people familiar with the talks said. Taiwan’s central bank Governor Perng Fai-nan, who said on Dec. 12 that the island’s economy is rebounding steadily, will keep the benchmark interest rate at 1.875 percent at a review tomorrow, according to all 20 economists surveyed by Bloomberg.

“Looks like there’s progress made with the fiscal-cliff situation, and that boosts risk-taking,” said Eric Hsing, a fixed-income trader at First Securities Inc. in Taipei. “Traders aren’t expecting any change in monetary policies tomorrow, but it looks like the central bank is quite optimistic about the outlook.”

The yield on the government’s 1.125 percent bonds due September 2022 rose to 1.148 percent from 1.144 percent yesterday, according to Gretai Securities Market. It touched 1.151 percent earlier, the highest level since Oct. 18. The yield has dropped 14 basis points this year.

Global funds bought $1.4 billion more Taiwanese stocks than they sold this month, taking net purchases in 2012 to $4.6 billion, exchange data show.

Taiwan Dollar

The Taiwan dollar was little changed at NT$29.1 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, poised for a fourth annual gain.

One-month implied volatility in the Taiwan dollar, a measure of expected moves in exchange rates used to price options, slipped 14 basis points to 2.95 percent.

The overnight interbank lending rate was little changed at 0.385 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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