Taiwan Five-Year Yield Drops to 19-Month Low on Growth Concern

Taiwan’s government bonds rallied, pushing the five-year yield to a 19-month low, as investors favored safer assets on concern the global economic recovery is faltering. The local dollar fell for a fourth day.

Official data due June 7 will show exports slumped 5.3 percent in May from a year earlier, according to the median estimate of economists surveyed by Bloomberg. The Taiex index of shares tumbled 3 percent, the most since November, after the Cabinet reached an agreement with ruling lawmakers on a plan that will make wealthier investors and larger shareholders pay a capital-gains tax. Global funds sold $89.7 million more of the island’s stocks than they bought today, wiping out this year’s net purchases, according to exchange data.

“The whole economic outlook is looking quite bad,” said Albert Lee, a Taipei-based fixed-income trader at Cathay United Bank Co. “Yields could test new lows.”

The yield on the government’s 1 percent bonds due January 2017 dropped one basis point, or 0.01 percentage point, to 0.915 percent, according to Gretai Securities Market. It reached 0.909 percent earlier, the lowest level for benchmark five-year rates since Oct. 26, 2010.

Stock indexes across Asia declined for a fourth day after data showed the U.S. jobless rate increased last month, wiping out this year’s gains in the Dow Jones Industrial Average.

Taiwan’s dollar fell 0.4 percent to NT$30.05 against its U.S. counterpart, according to Taipei Forex Inc. It touched NT$30.066, the weakest level since Jan. 17. One-month implied volatility, a measure of exchange-rate swings traders use to price options, was unchanged at 6 percent.

The overnight interbank lending rate was little changed at 0.511 percent, according to a weighted average compiled by the Taiwan Interbank Money Center.

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