Taiwan Five-Year Bond Yield Near 3-Week High on Growth Optimism

Taiwan’s five-year bond yield was near the highest level in almost three weeks as signs of an economic pickup in the region damped demand for the safety of sovereign debt. The local dollar was little changed.

The island’s economy grew 3 percent last quarter from a year earlier, after a 0.98 percent expansion in the previous three months, a Bloomberg survey of economists showed before a report due tomorrow. The MSCI Asia Pacific Index of shares headed for the highest close since August 2011 after data showed South Korea’s factory output unexpectedly rose 1 percent in December from a month earlier. Taiwan’s bond and stock markets will be closed for Lunar New Year holidays starting Feb. 7.

“An improving economic outlook has led to bearish sentiment in the bond market,” said James Wang, a fixed-income trader at Yuanta Securities Co. in Taipei. “Some traders are also clearing their positions before the holiday.”

The yield on Taiwan’s 0.875 percent government bonds due January 2018 was at 0.91 percent, according to Gretai Securities Market. Benchmark five-year rates touched 0.911 percent yesterday, the highest level since Jan. 11.

The Taiwan dollar was at NT$29.57 against its U.S. counterpart, compared with NT$29.559 yesterday, according to Taipei Forex Inc. It reached NT$29.70 yesterday, the weakest level since Sept. 14. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, fell 41 basis points to 4.52 percent.

The central bank sold its currency to counter gains during the final minutes of trading on most days in the past 10 months, according to traders, who asked not to be identified.

The overnight interbank lending rate was steady at 0.388 percent, a weighted average compiled by the Taiwan Interbank Money Center shows.

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