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Taiwan’s 10-Year Yield at Record Low After Growth Forecast Cut

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Nov. 1 (Bloomberg) -- The yield on Taiwan’s benchmark 10-year bonds reached a record low after the government slashed its economic growth forecasts. The local dollar weakened, snapping a three-day advance.

Gross domestic product will increase 1.05 percent this year, compared with an earlier estimate of 1.66 percent, the statistics bureau said yesterday. The economy will expand 3.09 percent in 2013, less than a previous prediction of 3.67 percent, it said. GDP rose 1.02 percent in the third quarter, compared with the 1.50 percent projection in a Bloomberg survey, official data showed yesterday.

“The cuts in growth forecasts confirmed investors’ pessimistic outlook and show Taiwan’s industries are really struggling,” said James Wang, a fixed-income trader at Yuanta Securities Co. in Taipei. “Yields will continue to go down.”

The yield on the 1.125 percent notes due September 2022 was steady at 1.128 percent as of 4:48 p.m. in Taipei, according to Gretai Securities Market. It reached 1.124 percent earlier. Wang said the rate could fall to 1.1 percent by year-end.

Exports will contract 2.5 percent in 2012, compared with an earlier forecast for a 1.7 percent decline, the statistics bureau said. HTC Corp., Asia’s second-largest smartphone maker, forecast on Oct. 26 fourth-quarter sales that missed analysts’ estimates and predicted its narrowest ever operating margin.

Taiwan’s dollar weakened 0.1 percent to NT$29.29 against its U.S. counterpart, data from Taipei Forex Inc. showed. It touched NT$29.20 earlier, the strongest level since Oct. 22. One-month implied volatility, a measure of exchange-rate swings used to price options, dropped 11 basis points to 3.40 percent.

One-month non-deliverable forwards declined 0.1 percent to NT$29.19 per dollar, according to data compiled by Bloomberg.

The overnight interbank lending rate was steady at 0.390 percent today, a weighted average compiled by the Taiwan Interbank Money Center shows.

To contact the reporter on this story: Andrea Wong in Taipei at awong268@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net

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