Taiwan 20-Year Bond Yield Climbs to 17-Month High After Auction

The yield on Taiwan’s 20-year bonds climbed to the highest level in 17 months after demand dwindled at an auction. The local currency gained.

Taiwan sold NT$40 billion ($1.3 billion) of similar- maturity notes yesterday at 1.847 percent, compared with the 1.80 percent median estimate of fixed-income traders in a Bloomberg survey. Investors bid for 1.26 times the amount on offer, down from 1.42 times at the previous sale on Jan. 23.

“The 20-year bond auction was pretty bad,” said Albert Lee, a fixed-income trader in Taipei at Cathay United Bank Co. “There is some selling pressure on long-term bonds.” Some investors may be looking at alternatives such as yuan- denominated securities sold in Taiwan, he said.

The yield on the 1.5 percent debt due January 2033 increased four basis points, or 0.04 percentage point, to 1.86 percent, according to Gretai Securities Market. That’s the highest level for a benchmark 20-year note since October 2011.

Deutsche Bank AG, Germany’s largest lender, won approval from Taiwan’s central bank to sell $1 billion of foreign- currency bonds on the island, according to a person familiar with the matter who asked not to be named because the details are private. The monetary authority will also allow the lender to sell yuan debt, the person said.

Currency Market

Chinatrust Commercial Bank issued securities in the Chinese currency last month in what the government said was the debut sale of the so-called Formosa bonds.

The Taiwan dollar rose 0.05 percent to NT$29.801 against its U.S. counterpart, based on prices from Taipei Forex Inc. The currency was up 0.2 percent in the last two minutes of trading before paring its advance. The central bank has sold the local currency near the close on most days in the past year, according to traders who asked not to be identified.

Taiwan’s central bank hasn’t devalued the local dollar continuously in the past 15 years, Governor Perng Fai-nan said yesterday in response to lawmakers’ questions.

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, dropped two basis points to 3.47 percent.

The overnight interbank lending rate held at 0.387 percent, according to the Taiwan Interbank Money Center.

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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