Taiwan Five-Year Yield Drops to Seven-Week Low on Growth Concern

Taiwan’s government bonds rose, pushing the five-year yield to the lowest level in almost seven weeks, as investors sought safety in sovereign debt amid signs the island’s economy is weakening. The local dollar rose.

Industrial production unexpectedly fell 3.28 percent in March from a year earlier, following an 11.45 percent slump the previous month, official data showed yesterday. The median estimate in a Bloomberg survey was for a 1.8 percent gain. Export orders dropped 6.6 percent in March from a year earlier, the government reported April 22. Overseas shipments account for around two-thirds of Taiwan’s gross domestic product.

“The data suggest global demand for Taiwan’s exports has yet to recover,” said Christie Chien, a Hong Kong-based economist at Daiwa Capital Markets. “This could prevent Taiwan from staging a full-fledged recovery in the near term.”

The yield on the 0.875 percent bonds due January 2018 was 0.919 percent, compared with 0.925 percent yesterday, according to Gretai Securities Market prices. The rate touched 0.914 percent earlier, the lowest level since March 8.

Global funds sold $91 million more Taiwanese stocks than they bought yesterday, taking net sales this month to $191 million, according to exchange data.

The Taiwan dollar rose 0.1 percent to NT$29.832 against its U.S. counterpart, Taipei Forex Inc. prices show. The currency touched a one-month high of NT$29.765 earlier, and was trading 0.3 percent stronger two minutes before the 4 p.m. close. The central bank has sold the local dollar in the run-up to the close on most days in the past year, according to traders who asked not to be identified.

Currency Forwards

One-month non-deliverable forwards rose 0.2 percent to NT$29.741 per dollar, according to data compiled by Bloomberg. One-month implied volatility in the Taiwan dollar, a gauge of expected moves in the exchange rate used to price options, slipped one basis point, or 0.01 percentage point, to 3.39 percent, according to data compiled by Bloomberg.

The overnight interbank lending rate was steady at 0.385 percent, according to a weighted average compiled by the Taiwan Interbank Money Center.

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