Taiwan Bond Yield at One-Month Low on Korea Risk; Currency Falls

Taiwan’s five-year bond yield fell to a one-month low and the local dollar slid past NT$30 against the greenback for the first time since August amid heightened political tensions on the neighboring Korean peninsula.

The Taiex index of shares slumped the most in 10 months as local financial markets reopened after holidays on April 4 and 5. South Korea said today the communist North may be preparing to conduct simultaneous nuclear and missile tests. Consumer prices rose 1.39 percent from a year earlier in March after climbing a revised 2.96 percent in February, the statistics bureau said today. The median estimate in a Bloomberg survey was for a 1.82 percent gain.

“The Taiwan markets are reflecting a mix of geopolitical and economic events that happened in the last four days,” said Stanford Chen, a fixed-income manager at KGI Securities Co. in Taipei. “And these events all favored bonds.”

The yield on the 0.875 percent bonds due January 2018 declined four basis points to 0.963 percent as of 10:19 a.m. in Taipei, according to Gretai Securities Market. That’s the lowest level for the benchmark five-year yield since March 11.

The Taiwan dollar depreciated 0.3 percent to NT$30.002 against its U.S. counterpart, according to Taipei Forex Inc. It touched NT$30.09 earlier, the weakest level since Aug. 3. It was 0.2 percent stronger three minutes before the end of trading on April 3 and finished little changed.

The central bank has sold the local currency in the run-up to the close on most days in the past year, according to traders who asked not to be identified.

One-month non-deliverable forwards slipped 0.2 percent to NT$30.007 per dollar from April 5, according to data compiled by Bloomberg. One-month implied volatility in the Taiwan dollar, a gauge of expected moves in the exchange rate used to price options, rose 15 basis points, or 0.15 percentage point, to 3.81 percent, according to data compiled by Bloomberg.

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: James Regan at jregan19@bloomberg.net

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