Taiwan Bonds Drop as Investors Offload Holdings Before Auction

Taiwan’s government bonds reversed earlier gains on speculation investors reduced their holdings before an auction next week. The local dollar gained.

Taiwan will sell NT$40 billion ($1.3 billion) of 20-year bonds on March 18 at 1.80 percent, according to the median estimate of fixed-income traders in a Bloomberg survey. The Ministry of Finance will release its debt-sale schedule for the next quarter on March 22.

“Volume has dropped a lot since the slump last week,” said Albert Lee, a fixed-income trader in Taipei at Cathay United Bank Co. “Trading will remain lackluster until we get some direction from the auction and bond-sale schedule.”

The yield on the island’s 1.125 percent bonds due March 2023 rose one basis point, or 0.01 percentage point, to 1.32 percent in Taipei, according to prices from Gretai Securities Market. It rose four basis points this week.

Currency Market

The Taiwan dollar rose 0.1 percent today to NT$29.762 against its U.S. counterpart, paring its weekly loss to 0.2 percent, 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 0.3 percent stronger two minutes before the 4 p.m. close. 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 were little changed at NT$29.71 per dollar, according to data compiled by Bloomberg. The contracts slipped 0.1 percent this week.

Implied volatility, a measure of expected moves in the exchange rate over a month used to price options, rose three basis points today and dropped 43 basis points from the end of last week to 3.33 percent. The overnight interbank lending rate was steady at 0.385 percent today and this week, according to the Taiwan Interbank Money Center.

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