Taiwan Bonds Rally After CPI Data as Currency Advances

Aug. 5 (Bloomberg) -- Taiwan’s bonds rose, pushing the five-year yield down by the most in at least seven months, after inflation slowed more than forecast and U.S. companies created fewer jobs than economists predicted. The local dollar gained.

Consumer prices increased 0.08 percent in July from a year earlier, the statistics bureau reported today in Taipei. The median estimate in a Bloomberg survey was for a repeat of June’s 0.6 percent increase. U.S. data on Aug. 2 showed employers added 162,000 workers in July, short of the 185,000 projected in a separate survey. The Federal Reserve has said it may pare $85 billion a month in asset purchases as early as September.

“The CPI is one reason” for today’s rally in bonds, said Allen Chu, a fixed-income trader at President Securities Corp. in Taipei. “Another reason is that the Fed won’t taper its stimulus any time soon. Buying momentum should continue.”

The yield on the 0.875 percent government notes due January 2018 fell seven basis points to 1.10 percent in Taipei, the biggest decline since the debt was sold in December, according to Gretai Securities Market. The rate climbed 10 basis points last week.

The overnight interbank lending rate was at 0.384 percent, compared with 0.386 percent at the end of last week, a weighted average compiled by the Taiwan Interbank Money Center showed.

Taiwan’s dollar appreciated 0.6 percent to NT$29.950 against its U.S. counterpart, after a similar-sized loss last week, Taipei Forex Inc. prices show.

One-month non-deliverable forwards climbed 0.2 percent to NT$29.925, according to data compiled by Bloomberg. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, dropped 30 basis points, or 0.30 percentage point, to 3.52 percent.

To contact the reporter on this story: Kyoungwha Kim in Singapore at kkim19@bloomberg.net

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