Rationing Plan to Revive Bond Market Liquidity Shows Taiwan Mire
- Trading in 10-year government notes plunged 98% in past decade
- Market hampered by buy-and-hold strategy of large investors
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A plan to ration bond holdings in Taiwan shows just how desperate authorities are to revive activity in a market plagued by near-zero inflation.
Trading in the island’s 10-year sovereign notes has plummeted 98 percent over the past decade as loose monetary policy and bouts of deflation pushed the yield down to 1.18 percent, the least in Asia after Japan. Recent proposals to reverse the slump include limiting each organization’s purchases of corporate debt in the primary market and capping holdings of benchmark government bonds in the first six months of trading.