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Taiwanese Bonds Advance as Slowing Economy Deters Risk-Taking

Taiwan’s bonds rose, pushing the five-year yield to a one-week low, as more evidence the island’s economy is slowing bolstered demand for the relative safety of government debt.

Exports, which account for about three-quarters of Taiwan’s economy, fell 1.5 percent in October from a year earlier, data showed today, more than the 1 percent decline forecast in a Bloomberg News survey of economists. Taiwan Power, the island’s biggest electricity provider, sold three-year debt at 1.24 percent yesterday, less than 1.35 percent in August, in a NT$11.8 billion ($401 million) offering of various tenors.

“There are more signs now that Taiwan’s economy hasn’t bottomed out,” said Daniel Wu, a Taipei-based bond trader at EnTie Commercial Bank. “Taiwan Power’s bond sale results yesterday also showed demand from investors, which supported government bonds.”

The yield on the 1.25 percent notes due October 2018 fell two basis points, or 0.02 percentage point, to 1.11 percent, according to Gretai Securities Market. That’s the biggest drop since Oct. 30 and the lowest level since Oct. 31.

The drop in exports in October follows a 7 percent decline in September. Taiwan’s economy grew at the slowest pace in a year in the third quarter, data showed last week.

Taiwan Dollar

Taiwan signed a free-trade agreement with Singapore today, its biggest trade deal with a country that has diplomatic ties with Beijing. The agreement covers trade in goods and services, investment and government procurement, according to the Ministry of Economic Affairs.

Taiwan’s dollar was little changed at NT$29.485 against the greenback, prices from Taipei Forex Inc. show. The currency lost 0.2 percent in the final 16 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 were little changed at NT$29.395 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, decreased six basis points to 3.1 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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