Taiwan Bond Yields Drop to Record Low as Data Fuel Stimulus Bets

  • Stagnant economy and exports supporting bonds, trader says
  • Jobless rate rises to one-year high, shipments decline

Taiwan’s 10-year government bonds rose, pushing the yield to a record low, as disappointing economic data fueled speculation the central bank will ease monetary policy again after delivering two interest-rate cuts this year.

A report on Tuesday showed that the island’s jobless rate climbed to a one-year high last month, while figures released the previous day recorded a larger-than-expected drop in export orders. Bonds surged last week after the central bank lowered its benchmark rate for the second straight quarter, a decision predicted by just half of the economists surveyed by Bloomberg.

“Expectations for continued easing next year still exist," said Sandy Liao, a bond trader at Ta Chong Bank Ltd. in Taipei. "The recovery has stagnated. Exports and export orders aren’t improving, so economic fundamentals are still a support to the bond market."

The yield on Taiwan’s 2025 bonds dropped two basis points to 1.032 percent, after earlier declining to 1.011 percent, an intraday record for benchmark 10-year notes, Taipei Exchange prices show. The five-year yield fell one basis points to 0.61 percent, its lowest close ever.

Bond yields were pushed down further Tuesday by a larger-than-expected cut in deposit rates by the Bank of Taiwan, Liao said. The island’s largest lender announced Monday it will lower its time-deposit rates by as much as 10.5 basis points following the central bank’s rate reduction last week.

Economic Data

Taiwan’s unemployment rate climbed to 3.84 percent in November, while export orders dropped 6.3 percent, more than the 5.3 percent decline predicted in a Bloomberg survey of economists. The central bank last week reduced the benchmark discount rate by 12.5 basis points to 1.625 percent.

Taiwan’s dollar was little changed at NT$33.090, according to prices from Taipei Forex Inc. One-month non-deliverable forwards climbed 0.3 percent to NT$32.882.

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