Taiwan 10-Year Bonds Fall, Currency Advances on Cyprus Bailout

Taiwan’s 10-year bonds fell as Cyprus agreed terms on a bailout, easing concern that Europe’s debt crisis will escalate. The local dollar rebounded from its weakest level in almost seven months.

The accord between Cyprus and the “troika” representing international lenders was reached overnight in Brussels and ratified by finance ministers from the 17-nation euro area. Taiwan plans to issue NT$140 billion ($4.7 billion) of bonds in four sales next quarter, less than the NT$185 billion sold in the same period of 2012. The central bank will leave the benchmark interest rate at 1.875 percent at its next policy meeting on March 28, according to all 10 economists in a Bloomberg survey.

“Yields are rising as the Cyprus situation is alleviated,” said Sam Chang, a fixed-income trader at Yuanta Securities Co. in Taipei. “Issuance for the next quarter is less than last year but that’s not the biggest news of the day, so the impact on the market is limited.”

The yield on the 1.125 percent government bonds due March 2023 was 1.305 percent as of 4:27 p.m. in Taipei, compared with 1.301 percent on March 22, according to Gretai Securities Market. The local dollar strengthened 0.1 percent to NT$29.889 against its U.S. counterpart, after touching NT$29.91 earlier, the weakest level since Sept. 7, according to Taipei Forex Inc. It was 0.2 percent stronger than March 22 one minute before the close of trading.

Forwards Rise

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 rose 0.1 percent to NT$29.835, according to data compiled by Bloomberg. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, fell 12 basis points, or 0.12 percentage point, to 3.52 percent, according to data compiled by Bloomberg.

The overnight interbank lending rate was little changed at 0.385 percent, a weighted average compiled by the Taiwan Interbank Money Center shows.

Before it's here, it's on the Bloomberg Terminal.