Taiwan’s Five-Year Bonds Snap Two-Day Drop on Fed Stimulus Bets

Taiwan’s five-year bonds snapped a two-day drop on speculation the Federal Reserve will maintain its record stimulus that has buoyed emerging-market assets.

The Fed will decide to keep its pace of bond buying at $85 billion at the end of a two-day meeting today, and taper it only in March, a Bloomberg survey of economists showed. BlackRock Inc. Chief Executive Officer Laurence D. Fink, who on Oct. 17 predicted the stimulus may not be cut until June, said yesterday the policy is contributing to “bubble-like markets.” U.S. consumer confidence fell more than forecast this month, data showed yesterday, while an Oct. 22 report revealed employment growth slowed in September.

“Investors are making their moves ahead of the Fed’s decision,” said Daniel Wu, a Taipei-based bond trader at EnTie Commercial Bank. “Recent U.S. economic data hasn’t been that great, and some reports have suggested tapering will begin as late as next June, so stocks and bonds have been bullish.”

The yield on the 1.25 percent government notes due October 2018 slipped three basis points, or 0.03 percentage point, to 1.082 percent, the lowest level in a week, according to Gretai Securities Market. The Taiex Index (TWSE) advanced 0.5 percent today to close at a two-year high.

Five-year interest-rate swaps dropped two basis points today to 1.22 percent, the lowest since July 3.

Currency Market

Taiwan’s dollar was little changed today at NT$29.475 against the greenback, prices from Taipei Forex Inc. show. The currency was trading at NT$29.397 before weakening 0.3 percent in the last 22 minutes of trading amid suspected central bank intervention. 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 climbed 0.1 percent to NT$29.345 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, increased five basis points to 3.27 percent.

The Taiwan Stock Exchange revoked a foreign institutional investor’s registration for not investing funds in securities as declared, the bourse said Oct. 28 without disclosing the investor’s identity. Authorities won’t allow illicit currency speculation, central bank Governor Perng Fai-nan told legislators the same day.

Taiwan’s economic growth isn’t as strong as earlier this year due to weaker exports in Asia and changes in China’s economic policy, Perng said Oct. 28. A report tomorrow will show the island’s economy expanded 2.6 percent in the third quarter, compared with 2.5 percent in the previous three months, according to economists surveyed by Bloomberg News.

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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