Taiwan Five-Year Yield Rises Most in Five Months on U.S. Data

Taiwan’s bonds fell, pushing the five-year yield up by the most in almost five months, tracking Treasuries after better-than-forecast U.S. economic data. The island’s dollar was little changed.

Jobless claims in the world’s largest economy fell to a five-year low and manufacturing expanded at the fastest pace in two years, reports showed yesterday. The yield on 10-year Treasuries increased 17 basis points this week, while the premium investors demand to hold the notes over similar-maturity Taiwanese government debt rose to 122 basis points yesterday, the highest in two years.

“U.S. economic data has been positive, and that’s been lifting Treasury yields and subsequently Taiwan’s,” said Allen Chu, a bond trader at President Securities Corp. (2855) in Taipei. “The spread between U.S. and Taiwan yields is widening. Taiwan’s central bank probably won’t adjust monetary policy anytime soon as economic fundamentals don’t warrant such a move.”

The yield on the 0.875 percent government bonds due January 2018 rose eight basis points to 1.17 percent in Taipei, the biggest increase for benchmark five-year yields since March 11, according to Gretai Securities Market. The rate advanced 10 basis points this week.

U.S. jobless claims declined to 326,000 in the week ended July 26 from 345,000 in the previous period, while the Institute for Supply Management’s factory index jumped to 55.4 in July from 50.9 the prior month.

Currency, Volatility

The Taiwan dollar was little changed at NT$30.129 against its U.S. counterpart, Taipei Forex Inc. prices show. The currency was trading 0.4 percent stronger seven minutes before the 4 p.m. close. The central bank has sold the island’s dollar 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 climbed 0.1 percent to NT$30.024 per dollar, according to data compiled by Bloomberg. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, dropped three basis points, or 0.03 percentage point, to 3.83 percent.

The overnight interbank lending rate was steady at 0.386 percent, according to a weighted average compiled by the Taiwan Interbank Money Center.

To contact the reporters on this story: Andrea Wong in Taipei at awong268@bloomberg.net; Argin Chang in Taipei at achang153@bloomberg.net

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

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