Taiwan Bonds Advance on Speculation Yellen to Maintain Tapering

Taiwan’s bonds rose, pushing the 10-year yield down by the most in two months, on speculation Federal Reserve chairman Janet Yellen will maintain the pace of stimulus cuts.

Investors will scrutinize Yellen’s first semi-annual testimony on monetary policy in Washington today for clues on how quickly the Fed will taper its asset purchases. The U.S. central bank cut its monthly debt buying by $10 billion in both January and February to $65 billion. Taiwan sold NT$40 billion ($1.3 billion) of five-year debt today at 1.08 percent, lower than all 10 estimates in a Bloomberg News survey.

“The market expects Yellen’s policies to be rather stable,” said Ray Cheng, a Taipei-based bond trader at Sinopac Securities Corp. “She’s expected to gradually taper stimulus.”

The yield on the 1.625 percent sovereign notes due March 2024 fell three basis points, or 0.03 percentage point, to 1.610 percent in when-issued trading, prices from Gretai Securities Market show. That is the biggest decrease for a benchmark 10-year bond since Dec. 9.

The island’s dollar weakened 0.1 percent to NT$30.406 against its U.S. counterpart, according to prices from Taipei Forex Inc. The currency slipped 0.3 percent in the last 11 minutes of trading amid suspected central bank intervention. The monetary authority has sold the local dollar in the run-up to the close on most days since March 2012, according to traders who asked not to be identified.

‘Negative Headlines’

Taiwan’s exports contracted by the most since September as shipments to China slid, official data showed yesterday. HSBC Holdings Plc weakened its year-end forecast for the Taiwan dollar to NT$29.8 from NT$29.1 against the greenback because of “negative headlines out of China,” strategists led by Paul Mackel in Hong Kong wrote in a research note yesterday. Manufacturing in Asia’s largest economy expanded in January at the slowest pace in six months, official data showed Feb. 1.

One-month non-deliverable forwards on the Taiwan dollar climbed 0.1 percent to NT$30.275 against the greenback, data compiled by Bloomberg show. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, fell 10 basis points to 3.80 percent.

The overnight interbank lending rate was steady at 0.386 percent, a weighted average compiled by the Taiwan Interbank Money Center showed.

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