Taiwan Bond Yield Retreats From 18-Month High; Currency Steady
Taiwan’s bonds rose, pushing the 10-year yield down from near an 18-month high, as some investors judged recent declines in the securities excessive. The island’s currency was little changed.
Benchmark 10-year yields surged 18 basis points in a five- day slump that ended March 11, while the Dow Jones Industrial Average of U.S. shares climbed to a record. Taiwan’s statistics bureau raised its 2013 growth forecast for the local economy to 3.59 percent last month from 3.53 percent, and boosted its projection for exports to 6.23 percent from 6.07 percent.
“Trade volumes have significantly shrunk from last week as stop-loss trades died down,” said Stanford Chen, a fixed-income manager at KGI Securities Co. in Taipei. “An improving Taiwan and global outlook will continue to present a bearish backdrop for bonds.”
The yield on the island’s 1.125 percent debt due March 2023 dropped six basis points, or 0.06 percentage point, to 1.31 percent, according to prices from Gretai Securities Market. The rate touched 1.40 percent on March 11, the highest for a benchmark 10-year note since September 2011. The 14-day relative strength index for the securities ended the three days through yesterday below 30, a level that signals to some investors that yields may decline.
The Taiwan dollar was little changed at NT$29.735 against its U.S. counterpart, based on prices from Taipei Forex Inc. It touched NT$29.81 on March 11, the weakest level since Sept. 10. The currency was trading 0.2 percent stronger two minutes before the 4 p.m. close in Taipei.
The central bank has sold the local currency in the runup to the close on most days in the past 11 months, according to traders who asked not to be identified.
One-month non-deliverable forwards strengthened 0.1 percent to NT$29.65 per dollar, according to data compiled by Bloomberg. Implied volatility, a measure of expected moves in the exchange rate over a month used to price options, fell one basis point to 3.3 percent. The overnight interbank lending rate was little changed at 0.386 percent, according to the Taiwan Interbank Money Center.
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