Taiwan Bond Yield Climbs to Two-Month High on Fed Taper Signs

Taiwan’s 10-year bonds fell, pushing the yield to a two-month high, after minutes of a Federal Reserve meeting indicated it may cut bond purchases in the “coming months” as the world’s largest economy improves.

U.S. Treasury yields rose after the record of the Oct. 29-30 Federal Open Market Committee meeting showed policy makers expect economic data to be consistent with its outlook for improvement in labor-market conditions, which would warrant trimming stimulus. U.S. jobs growth topped forecasts last month, a signal economic recovery is gathering pace. Taiwan’s gross domestic product expanded at the slowest pace in a year in the third quarter while exports fell in the last two months.

“U.S. Treasury yields jumped last night and demand for longer-dated bonds has been weak,” said James Wang, a bond trader at Yuanta Securities Co. in Taipei. “But the prospect of tapering was already expected in Taiwan, and the domestic economy is sluggish, so yields increased surprisingly little.”

The yield on the 1.75 percent notes due September 2023 climbed two basis points, or 0.02 percentage point, to 1.74 percent in when-issued trading as of 10:19 a.m. in Taipei, according to Gretai Securities Market. That’s the highest rate for 10-year sovereign debt since Sept. 14. The bonds will be sold at a Nov. 29 auction.

Currency Market

Taiwan’s dollar was little changed at NT$29.563 against the greenback, prices from Taipei Forex Inc. show, after slipping 0.2 percent in the last 12 minutes of trading yesterday amid suspected central bank intervention. The monetary authority has sold the currency in the run-up to the close on most days since March 2012, according to traders who asked not to be identified.

Taiwan’s central bank yesterday reported a $14.9 billion current-account surplus in the third quarter, compared with a revised $14 billion in the previous three months. Export orders rose 3.2 percent in October, data showed yesterday, beating the median estimate of 0.8 percent in a Bloomberg survey.

One-month non-deliverable forwards on Taiwan’s currency dropped 0.2 percent to NT$29.512 per dollar, according to data compiled by Bloomberg. The contracts declined 0.2 percent yesterday.

One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, fell three basis points to 3.18 percent. The overnight interbank lending rate was little changed at 0.388 percent from yesterday’s 0.386 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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