Taiwan Bond Yields Drop to 2-Month Low, Currency Falls on Europe

Taiwan’s bonds rose, pushing yields to the lowest level since March, and the island’s currency fell after European voters favored leaders who vowed to move away from austerity measures, fueling concern the region’s debt crisis will worsen.

The currency retreated for a fourth day after French Socialist leader Francois Hollande, who defeated Nicolas Sarkozy in the presidential poll, said yesterday that “austerity isn’t inevitable.” His comments were echoed in Greece, where voters flocked to anti-bailout groups, leaving the two main parties short of a majority. Global funds sold $609 million more Taiwanese stocks than they bought today, trimming net purchases for this year to $3.2 billion, exchange data show.

“Uncertainties in Europe are affecting the markets,” said George Pu, a Taipei-based fixed-income trader at Sinopac Securities Corp. “There is room for yields to go down more.”

The yield on the government’s 1 percent bonds due January 2017 fell one basis point, or 0.01 percentage point, to 0.967 percent, according to Gretai Securities Market. That was the lowest level for benchmark five-year rates since March 13.

Taiwan’s dollar weakened 0.4 percent to NT$29.382 against its U.S. counterpart, according to Taipei Forex Inc. It touched NT$29.409 earlier, the weakest level since April 27. One-month implied volatility, a measure of exchange-rate swings traders use to price options, rose 20 basis points to 4.5 percent.

Consumer prices on the island increased 1.44 percent last month from a year earlier, compared with the median estimate of 1.41 percent in a Bloomberg survey, statistics bureau data showed today. Official data also showed exports slumped 6.4 percent during the same period, worse than the 3.1 percent fall analysts predicted in another survey.

“Taiwan’s inflation is still in control, personally I’m not too worried about it,” Pu said.

The overnight interbank lending rate was little changed at 0.509 percent, according to a weighted average compiled by the Taiwan Interbank Money Center. It reached 0.512 percent on May 4, the highest level since 2008.

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