Taiwan Bonds Rise on Speculation Funds Lured After 5-Day Decline

Taiwan’s 10-year government bond yields fell from the highest level since September 2011 on speculation some investors took advantage of a five-day decline in prices to buy the securities.

Borrowing costs on the notes climbed 16 basis points in the last two days, the largest two-day jump for a benchmark bond of that tenor in more than four years. Demand for debt had waned after reports showed job creation in the U.S., Taiwan’s second- biggest export market, beat economists’ estimates in February, while the jobless rate dropped to 7.7 percent from 7.9 percent. The Taiex index of shares traded 1.2 percent off a one-year high as global funds bought $404 million more stocks than they sold in March, taking 2013 net purchases to $2.1 billion, exchange data show.

“Some traders think it’s pretty much impossible for yields to rise by the same extent as in the past few days,” said Sam Chang, a fixed-income trader at Yuanta Securities Co. in Taipei. “We’re seeing people closing positions” that bet on further declines, he said.

The yield on the 1.125 percent notes due March 2023 slipped one basis point, or 0.01 percentage point, to 1.37 percent in Taipei, according to prices from Gretai Securities Market. The rate touched 1.4 percent earlier, the highest for a benchmark 10-year yield since September 2011.

The first yuan-denominated bonds sold in Taiwan, an issue from Chinatrust Commercial Bank, started trading today and the yield was unchanged at 2.9 percent, according to Gretai Securities Market.

Taiwan Dollar

The Taiwan dollar was little changed at NT$29.73 against its U.S. counterpart, based on prices from Taipei Forex Inc. It touched NT$29.810 yesterday, the weakest level since Sept. 10. The currency was trading 0.2 percent stronger at NT$29.673 one minute before the 4 p.m. close.

The central bank has sold the local currency near the close on most days in the past 11 months, according to traders who asked not to be identified.

One-month non-deliverable forwards strengthened 0.1 percent to NT$29.67 per dollar, according to data compiled by Bloomberg. Implied volatility, a measure of expected moves in the exchange rate over a month used to price options, fell 32 basis points to 3.34 percent. The overnight interbank lending rate was little changed at 0.386 percent, according to the Taiwan Interbank Money Center.

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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