Taiwan Bond Yield Drops to Lowest This Month After Exports Fall

Taiwan’s 10-year bonds rose, pushing the yield to the lowest level in almost two weeks, as falling exports and the U.S. debt gridlock saw investors favor the relative safety of sovereign notes.

Overseas shipments, which account for around three-quarters of the island’s economy, slumped 7 percent in September from a year earlier after rising in the previous four months, official data showed yesterday. The Standard & Poor’s 500 Index (SPX) closed at the lowest level in a month yesterday, after Asian stocks slid for a second day, as U.S. lawmakers remained deadlocked over extending the nation’s debt limit to avoid a default.

“It’s a reflection of yesterday’s economic data and the U.S. stock market,” said Sandy Liao, a fixed-income trader at KGI Securities Co. in Taipei. “Some buying sentiment has emerged for bonds.”

The yield on the 1.75 percent government notes due September 2023 fell two basis points to 1.649 percent, according to Gretai Securities Market. That is the lowest level for benchmark 10-year bonds since Sept. 26. Taiwan will sell NT$30 billion ($1 billion) of five-year securities at 1.16 percent tomorrow, according to the median estimate of 10 fixed-income traders surveyed by Bloomberg News.

Taiwan’s dollar closed little changed today at NT$29.542 against its U.S. counterpart, prices from Taipei Forex Inc. show. The currency dropped 0.5 percent in the final 14 minutes of trading on suspected intervention by the central bank. The monetary authority has sold the local dollar in the run-up to the close on most days since March 2012, according to traders who asked not to be identified.

One-month non-deliverable forwards on the Taiwan dollar were little changed at NT$29.32 against the greenback, according to data compiled by Bloomberg. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, dropped seven basis points to 3.94 percent.

The overnight interbank lending rate was steady at 0.385 percent, a weighted average compiled by the Taiwan Interbank Money Center showed.

To contact the reporter on this story: Justina Lee in Hong Kong at jlee1489@bloomberg.net

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

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