Taiwan Bonds Gain as Economic Prospects Weaken; Currency Drops

Taiwan’s government bonds rose as concern faltering global growth will hurt the island’s exports spurred demand for safer assets. The local dollar weakened.

Taiwan’s export orders shrank for a fifth month in July, declining 4.4 percent from a year earlier, official data showed Aug. 20. French President Francois Hollande is due in Berlin tomorrow to discuss the euro zone’s debt crisis with German Chancellor Angela Merkel as the European Central Bank fleshes out its plans to help lower borrowing costs of indebted nations such as Greece.

“Taiwan’s outlook isn’t looking good,” said Albert Lee, a Taipei-based fixed-income trader at Cathay United Bank Co. “The market’s been very indecisive regarding what the ECB will really do to contain the crisis.”

The yield on Taiwan’s 1.25 percent notes due March 2022 dropped one basis point to 1.184 percent, according to Gretai Securities Market.

The Ministry of Finance auctioned NT$30 billion ($1 billion) of 30-year debt yesterday at a higher yield than investors forecast. The notes were sold at 1.738 percent, compared with the 1.71 percent median estimate of six traders surveyed by Bloomberg. Insurance companies, the biggest buyer of the sale, took 45 percent of the securities, up from 31.6 percent at a similar auction in April.

Concessions are possible for Greece if Prime Minister Antonis Samaras shows a willingness to meet the main targets set out in his country’s bailout program, a senior lawmaker with Merkel’s government said yesterday.

Taiwan’s dollar closed 0.1 percent weaker at NT$30.01 against its U.S. counterpart, according to Taipei Forex Inc. One-month implied volatility, a measure of exchange-rate swings used to price options, was little changed at 3.2 percent.

The overnight money-market rate was little changed at 0.385 percent, according to a weighted average compiled by the Taiwan Interbank Money Centre.

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