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Taiwan Bond Yields Near Record Low as Growth Estimates Lowered

Taiwan’s government bonds had a second weekly gain, pushing the 10-year yield to a record low, after the government cut economic growth forecasts as the global slowdown damps export outlook. The local dollar was steady.

Gross domestic product will rise 1.05 percent this year, compared with 1.66 percent predicted earlier, the statistics bureau reported yesterday. Investors are focused on events in Taiwan’s biggest overseas markets of China and the U.S., according to Albert Lee, a fixed-income trader at Cathay United Bank Co. President Barack Obama and Republican candidate Mitt Romney face off in presidential elections on Nov. 6, while China’s 18th Communist Party Congress begins two days later.

“Yields will continue to go down slowly, but we should hit bottom soon,” said Taipei-based Lee. “It’s going to be an international events-heavy week. Traders are staying cautious.”

The yield on the 1.125 percent notes due September 2022 fell one basis point this week and was little changed today at 1.132 percent, according to Gretai Securities Market. It reached the low of 1.124 percent yesterday.

Taiwan’s $355 billion economy will expand 3.09 percent in 2013, less than a previous forecast of 3.67 percent, the statistics bureau said.

The local currency was little changed at NT$29.30 against the dollar today and this week, data from Taipei Forex Inc. showed. One-month implied volatility, a measure of exchange-rate swings used to price options, fell 15 basis points, or 0.15 percentage point, to 3.40 percent during the five days.

One-month non-deliverable forwards appreciated 0.2 percent to NT$29.185 for the week and were steady today, according to data compiled by Bloomberg. The overnight interbank lending rate was little changed today and this week at 0.387 percent, a weighted average compiled by the Taiwan Interbank Money Center shows.

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