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Taiwan Bonds Rise as Europe Political Concerns Deter Risk-Taking

Taiwan’s government bonds gained, pushing five-year yields to a one-week low, as investors favored the safest assets on concern political shifts in Europe will lead to a worsening of the region’s debt crisis. The island’s dollar was little changed.

Overseas investors sold $2.7 million more local stocks than they bought today, according to exchange data. The MSIC Asia-Pacific Index of shares fell for a fourth day after Dutch Prime Minister Mark Rutte tendered his resignation and as French President Nicolas Sarkozy trailed his Socialist challenger in a presidential race. Official data showed yesterday Taiwan’s industrial production dropped 3.42 percent in March from a year earlier, after an 8.4 percent gain the previous month.

“We’re seeing risk-off sentiment today due to headline news from Europe,” said Dariusz Kowalczyk, a Hong Kong-based strategist at Credit Agricole. “The external environment needs to improve for Asian currencies to be able to enjoy another leg up, and they seem vulnerable in the short term.”

The yield on Taiwan’s 1 percent securities due January 2017 dropped one basis point to 1.031 percent, the lowest level since April 12, according to Gretai Securities Market.

The government sold NT$40 billion ($1.4 billion) of 20-year bonds today at 1.725 percent, up from 1.708 percent at a March sale of the same maturity.

Taiwan’s dollar was little changed at NT$29.526 against its U.S. counterpart, according to Taipei Forex Inc. It touched NT$29.395 yesterday, the strongest level since April 5. One-month implied volatility on the Taiwan dollar, a measure of exchange-rate swings traders use to price options, rose seven basis points to 3.4 percent. A basis point is 0.01 percentage point.

The overnight money-market rate was steady at 0.494 percent, according to a weighted average compiled by the Taiwan Interbank Money Center. It reached 0.497 percent yesterday, the highest level since 2008.

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