Taiwan 10-Year Bonds Gain for Third Day After Funds Sell Stocks

Taiwan’s government bonds rose for a third day, the longest winning streak in two months, after global funds cut holdings of the island’s stocks. The local dollar weakened.

Overseas investors sold $159 million more Taiwanese equities than they bought today, a third day of net sales, as the Taiex index of shares retreated from its highest level in almost a year. President Ma Ying-jeou said today the island’s economic recovery “could be slow but steady.” The statistics bureau raised its 2013 growth forecast to 3.59 percent last month from 3.53 percent, and boosted its projection for exports to 6.23 percent from 6.07 percent.

“Stocks are retreating, showing the Taiex rally lacks momentum,” said James Wang, a fixed-income trader at Yuanta Securities Co. in Taipei. “On the bonds side, some traders were forced to buy back bonds to close their short positions.” A short position is a bet the price of an asset will decline.

The yield on the island’s 1.125 percent debt due March 2023 fell one basis point, or 0.01 percentage point, to 1.306 percent in Taipei, according to prices from Gretai Securities Market. The run of declines was the longest for a benchmark 10-year note since Jan. 17.

Currency Market

The Taiwan dollar weakened 0.2 percent to NT$29.80 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 central bank has sold the local currency in the run-up to the close on most days in the past year, according to traders who asked not to be identified.

One-month non-deliverable forwards slipped 0.1 percent to NT$29.69 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, rose two basis points to 3.33 percent. The overnight interbank lending rate was little changed at 0.386 percent, according to the Taiwan Interbank Money Center.

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