Taiwan 10-Year Bonds Have Weekly Gain on Stock Market Drop

Taiwan’s 10-year bonds completed a weekly advance, snapping six weeks of losses, on speculation investors favored the safest assets as stocks declined. The local dollar fell this week.

The benchmark Taiex stock index declined 1.1 percent after three weeks of gains. Global funds sold $84 million more of the island’s shares than they bought in the past five days, exchange data show.

“The stock market performance was pretty bad in the last few days so some people may tend to buy bonds to hedge their portfolio,” said Albert Lee, a fixed-income trader in Taipei at Cathay United Bank Co. “That’s why the bond yield dropped.”

The yield on the 1.125 percent notes due September 2022 slipped one basis point, of 0.01 percentage point, to 1.16 percent this week, according to Gretai Securities Market. The rate was little changed today.

Taiwan’s dollar weakened 0.1 percent this week to NT$29.060 against its U.S. counterpart, based on prices from Taipei Forex Inc. It rose 0.1 percent today, paring a gain of 0.5 percent a minute before the market closed. The monetary authority has sold the local currency to counter gains on most days in the past nine months, according to the traders, who asked not to be identified.

One-month implied volatility on the Taiwan dollar, a measure of expected moves in exchange rates used to price options, dropped 38 basis points to 3 percent this week. The gauge was unchanged today.

China, the biggest buyer of Taiwan’s exports, reported today that economic growth accelerated for the first time in two years, with industrial output picking up, after the government implemented policies to revive domestic demand. Gross domestic product increased 7.9 percent in the fourth quarter from a year earlier, after a 7.4 percent gain in the previous three months.

To contact the reporter on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net

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

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