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Taiwan 10-Year Yield at One-Week High on Shift to Treasuries

March 27 (Bloomberg) -- Taiwan’s bonds fell, pushing the 10-year yield to the highest level in almost a week, on speculation investors are shifting to U.S. dollar assets. The local currency weakened.

The Dollar Index traded near the highest level since August after the S&P/Case-Shiller index showed U.S. residential real-estate prices increased in January by the most since June 2006. Taiwan sold NT$20 billion ($669 million) of 364-day Treasury bills today at 0.629 percent, the second-lowest yield for that maturity on record, and the central bank will leave its benchmark interest rate unchanged at 1.875 percent tomorrow, according to all 20 analysts surveyed by Bloomberg News.

“Attention has shifted to U.S. dollar assets, like Treasuries,” said Albert Lee, a fixed-income trader in Taipei at Cathay United Bank Co. “The tight greenback liquidity has made Taiwan dollar liquidity very loose.”

The yield on the 1.125 percent government bonds due March 2023 rose to 1.314 percent from 1.310 percent yesterday in Taipei, according to Gretai Securities Market. That was the highest level since March 21.

The Taiwan dollar weakened 0.2 percent to NT$29.941 against its U.S. counterpart, according to Taipei Forex Inc. It was little changed one minute before the 4 p.m. close. The central bank has sold the local currency in the run-up to the close on most days in the past year, according to traders who asked not to be identified.

One-month non-deliverable forwards declined 0.2 percent to NT$29.85, according to data compiled by Bloomberg. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, fell one basis point, or 0.01 percentage point, to 3.55 percent, according to data compiled by Bloomberg.

The overnight interbank lending rate was little changed at 0.386 percent, 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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