Taiwan Five-Year Bonds Rise Most Since October on U.S. Jobs Data

April 7 (Bloomberg) -- Taiwan’s five-year bonds rose as U.S. jobs data that missed estimates eased concern the Federal Reserve will raise interest rates sooner than analysts expect, a move that would prompt Asian central banks to follow suit.

The local yield fell the most since October, following an eight basis-point drop for 10-year U.S. treasuries on April 4 after a report showed U.S. employers added 192,000 jobs in March. That trailed the median estimate of 200,000 in a Bloomberg survey of economists, easing concern the Fed will quicken stimulus cuts or bring forward a timeline to raise borrowing costs. Taiwan’s consumer prices climbed 1.61 percent last month, compared with the 1 percent median forecast in a separate Bloomberg survey and February’s 0.05 percent decline.

“The timing of the first rate hike in the U.S. is the focal point now,” said Kevin Chan, a Taipei-based bond trader at Sinopac Securities Corp. “But Taiwan’s CPI data will also be important. With inflation quickening and the Fed tapering, bond buyers may be more hesitant.”

The yield on the 1 percent sovereign notes due February 2019 fell three basis points, or 0.03 percentage point, from April 3 to 1.0958 percent, prices from GreTai Securities Market show. That’s the biggest drop for benchmark five-year securities since Oct. 23. Taiwan’s financial markets were closed on April 4 for a holiday.

Currency Market

It is “very likely” Taiwan will quicken the normalization of policy rates to match the Fed’s pace, according to Barclays Plc economist Wai Ho Leong. Data today showed Taiwan’s exports increased 2 percent in March, faster than the 0.7 percent gain forecast in a Bloomberg survey.

The island’s dollar appreciated 0.2 percent to NT$30.32 against its U.S. counterpart, according to prices from Taipei Forex Inc. The currency earlier touched NT$30.222, the strongest level since Feb. 19.

One-month non-deliverable forwards fell 0.1 percent to NT$30.22 per dollar. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, was little changed at 3.40 percent, data compiled by Bloomberg show.

To contact the reporter on this story: Justina Lee in Taipei at jlee1489@bloomberg.net

To contact the editors responsible for this story: James Regan at jregan19@bloomberg.net Amit Prakash, Anil Varma