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Taiwan Bonds Have Fourth Weekly Gain as Growth Estimates Cut

Taiwan’s government bonds gained for a fourth week, the longest winning streak in five months, as the slowing economy spurred demand for safer assets. The island’s dollar rallied as U.S. jobless claims fell.

President Ma Ying-jeou said in a televised speech on Oct. 10 that reviving growth will be a top priority, as Deutsche Bank AG cut its 2012 forecast to 1.3 percent from 2.1 percent on Oct. 8, citing a slump in exports and weak domestic demand. The Asian Development Bank reduced its estimate by half to 1.7 percent last week. Overseas shipments rebounded in September after contracting for six consecutive months.

“Yields are sliding toward a record low so traders are acting more cautious,” said Eric Hsing, a fixed-income trader at First Securities Inc. in Taipei. “People are starting to worry this slowdown is going to turn into a structural problem for the economy.”

The yield on the 1.125 percent notes due September 2022 fell one basis point to 1.135 percent this week and was little changed today, according to Gretai Securities Market. Benchmark 10-year rates reached an all-time low of 1.125 percent on July 26.

Government data on Oct. 19 may show export orders, an indication of shipments over the next one to three months, rose 2.04 percent in September from a year earlier, after falling 1.5 percent the previous month, according to the median estimate of economists surveyed by Bloomberg. The economy contracted 0.18 percent in the second quarter from a year earlier.

Currency Gains

Asian currencies and stocks rose today after official data showed yesterday that applications for U.S. unemployment benefit dropped to 339,000 in the week ended Oct. 6, the least since February 2008.

The Taiwan dollar strengthened 0.2 percent today to NT$29.36 against its U.S. counterpart, the biggest gain in two weeks. It was little changed for the week. One-month non-deliverable forwards in the currency climbed 0.1 percent to NT$29.16 during the five days, data compiled by Bloomberg show.

One-month implied volatility in the Taiwan dollar, a measure of exchange-rate swings used to price options, fell 28 basis points, or 0.28 percentage point, to 3.51 percent from the end of last week.

The overnight interbank lending rate was little changed at 0.39 percent, a weighted average compiled by the Taiwan Interbank Money Center shows.

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