Taiwan 10-Year Yields Decline From a Two-Month High

Taiwan’s government bonds were steady, with 10-year yields slipping from a two-month high, after U.S. House Republican leaders scrapped a plan to allow higher taxes as budget negotiations stalled.

House Speaker John Boehner’s decision to scrap the tax plan means lawmakers won’t vote until after Christmas on ending a budget-deficit showdown that may push the U.S. economy into recession. If U.S. President Barack Obama fails to reach an agreement with the Republicans by year-end, more than $600 billion of automatic tax increases and spending cuts will start taking effect. Financial markets are open in Taiwan today to compensate for the extra public holiday on Dec. 31.

“Trade volume has dropped a lot since we’re approaching the holiday seasons, a slight even risk would create relatively big volatilities in the market,” said George Pu, a bond trader at Sinopac Securities Corp. in Taipei. “The fiscal cliff problem is basically the only thing traders pay attention to at the moment.”

The yield on the government’s 1.125 percent bonds due September 2022 was little changed at 1.150 percent as of 10:30 a.m. local time, according to Gretai Securities Market. It touched 1.152 percent on Dec. 19, the highest level since Oct. 18. The government will release a bond issuance plan for the next quarter today.

Taiwan’s dollar climbed 0.3 percent to NT$29.044 versus the U.S. counterpart, based on Taipei Forex Inc. prices. The currency has appreciated 4.3 percent this year, poised for a fourth annual gain.

The overnight interbank lending rate was steady at 0.388 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: Paul Tighe at ptighe@bloomberg.net

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