Taiwan Bonds Have First Weekly Gain in a Month; Currency Rises

Taiwan’s five-year bonds had their first weekly gain in a month as signs economic growth is losing momentum prompted investors to favor the safest assets. The local dollar strengthened.

Exports, which account for more than 60 percent of gross domestic product, rose 1.6 percent in July from a year earlier, data showed Aug. 7. That was less than the 4.9 percent increase forecast by economists in a Bloomberg survey and compared with an 8.6 percent advance the previous month. Consumer prices advanced 0.08 percent, the least since August 2010.

The yield on the government’s 0.875 percent bonds due January 2018 fell five basis points this week to 1.12 percent in Taipei, the biggest drop since the five days ended July 12, according to Gretai Securities Market. The rate rose one basis point, or 0.01 percentage point, today.

“Taiwan’s July economic data was bad, which was a contrast to its June numbers, showing its economic outlook isn’t certain yet,” said Sandy Liao, a fixed-income trader at KGI Securities Co. in Taipei.

The central bank sold NT$10 billion ($334 million) of two-year negotiable certificates of deposit today at 0.78 percent, the first offering of the securities since 2003. Sovereign debt due February 2015 yielded 0.66 percent yesterday, latest prices show.

Currency Strengthens

The Taiwan dollar gained 0.6 percent from the end of last week, and was little changed today at NT$29.955 against its U.S. counterpart, Taipei Forex Inc. prices show. The currency was 0.1 percent stronger eight minutes before the 4 p.m. close.

The central bank has sold its currency in the run-up to the close on most days since March 2012, according to traders who asked not to be identified.

One-month non-deliverable forwards rose 0.3 percent to NT$29.908 per dollar this week, according to data compiled by Bloomberg. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, fell 39 basis points to 3.44 percent.

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

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