Taiwanese 10-year government bonds fell for a fourth week, the longest stretch since May, as improving U.S. economic data added to signs the Federal Reserve will soon reduce stimulus that spurred flows to emerging markets.
Jobless claims in the world’s largest economy declined to 323,000 last week, less than the lowest estimate among 50 economists surveyed by Bloomberg, data showed yesterday, while a gauge indicated service industries expanded at the fastest pace in almost eight years. Speculation the Federal Open Market Committee will taper debt-buying known as quantitative easing at its Sept. 17-18 meeting has pushed up 10-year U.S. Treasury yields by 20 basis points this week.
The yield on Taiwan’s bonds due September 2023 climbed six basis points this week and three basis points today to 1.79 percent in when-issued trading before the auction on Sept. 14. Two-year interest-rate swaps rose three basis points during the five days to 1.09 percent, the highest since February 2011.
“Recently, various U.S. economic data releases have all been strong,” said James Wang, a Taipei-based fixed-income trader at Yuanta Securities Co. “QE tapering is a certainty now. The new variable is that even short-end yields have risen.”
Global funds bought $1.2 billion more Taiwanese shares than they sold this week, taking net purchases this year to $2.5 billion, exchange data show.
The Taiwan dollar strengthened 0.3 percent this week and today to NT$29.900 against the greenback, Taipei Forex Inc. prices show. The currency was trading 0.6 percent stronger five minutes before the 4 p.m. close. The central bank has sold the currency in the run-up to the finish on most days since March 2012, according to traders who asked not to be identified.
One-month non-deliverable forwards gained 0.6 percent this week to NT$29.726 per dollar, according to data compiled by Bloomberg. The contracts fell 0.1 percent today. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, jumped 49 basis points this week and 10 basis points today to 4.22 percent.
The overnight interbank lending rate was steady this week and today at 0.385 percent, a weighted average compiled by the Taiwan Interbank Money Center showed.