Taiwan Bonds Decline for Fifth Week as Stocks Jump on Growth

Taiwan’s five-year bonds fell for a fifth week as a gain in stocks to the highest level in more than six years reduced demand for debt.

The Taiex index of shares posted its biggest weekly advance since March, spurring the longest declining streak in benchmark five-years notes in 18 months. Taiwan’s manufacturing industry expanded by the most in four months in June, a Purchasing Managers’ Index from HSBC Holdings Plc and Markit Economics showed this week.

“The stock market’s outlook is still quite good,” said Tobby Lin, a Taipei-based fixed-income trader at Yuanta Securities Co. “Five-year bonds are weaker as insurers prefer longer-dated bonds.”

The yield on government notes due July 2019 climbed six basis points this week to 1.234 percent, prices from GreTai Securities Market show. Benchmark five-year yields have jumped 20 basis points, or 0.20 percentage point, since May 30.

Five-year securities rose today, with the yield dropping two basis points, as some investors covered positions that were betting on further declines, Lin said.

The Taiex index climbed 2.2 percent for the week and rose to 9,550.11 today, the highest level since November 2007.

The island’s dollar appreciated 0.1 percent this week to NT$29.937 against its U.S. counterpart and was little changed today, according to prices from Taipei Forex Inc. One-month non-deliverable forwards fell 0.1 percent this week to NT$29.875, data compiled by Bloomberg show. The contracts climbed 0.1 percent today.

One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, dropped eight basis points this week and seven basis points today to 2.46 percent.

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

To contact the editors responsible for this story: James Regan at jregan19@bloomberg.net Simon Harvey, Andrew Janes

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