Taiwan Bonds Have First Weekly Gain in a Month on Safety Demand

Taiwan’s government bonds completed the first weekly gain in more than a month as concern Europe’s economic outlook remains weak boosted demand for safer assets. The local dollar was little changed.

European Central Bank President Mario Draghi signaled on Feb. 27 the bank has no intention of tightening monetary policy anytime soon. Taiwan sold NT$40 billion ($1.4 billion) of 10-year bonds today at 1.215 percent, matching the median estimate of fixed-income traders surveyed by Bloomberg.

“Risk-averse sentiment dominated the market in the past week,” said James Wang, a fixed-income trader at Yuanta Securities Co. in Taipei. “The result of the bond sale will be indicative of the direction of Taiwan’s bonds.”

The yield on the 1.125 percent bonds due March 2023 fell one basis point this week to 1.214 percent, according to Gretai Securities Market. It was little changed today.

The Taiwan dollar was little changed from a week ago and gained 0.1 percent today to NT$29.666 against its U.S. counterpart, based on prices from Taipei Forex Inc. One-month non-deliverable forwards were steady this week and today at NT$29.620, according to data compiled by Bloomberg.

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, dropped five basis points, 0.05 percentage point, this week and eight basis points today to 4.9 percent.

China PMI

The central bank has sold the local currency near the close on most days in the past 11 months, according to traders who asked not to be identified.

China’s official Purchasing Managers’ Index fell to a five-month low of 50.1, a report showed today. That was less than the median estimate of 50.5 in a Bloomberg survey of economists, though above the 50 level that is the dividing line between expansion and contraction. A separate gauge by HSBC Holdings Plc and Markit Economics suggested manufacturing expanded the least in four months.

The overnight interbank lending rate was steady at 0.39 percent, according to Taiwan Interbank Money Center.

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