Taiwan’s 10-Year Bonds Drop Most Since September on Rate Outlook

Taiwan’s 10-year bonds fell this week, pushing up the yield by the most since September, on speculation the central bank will signal plans to boost borrowing costs at a quarterly policy review next week.

The monetary authority is forecast to keep the benchmark interest rate at 1.875 percent on June 26, before raising it to 2 percent in December, according to economists surveyed by Bloomberg. Inflation exceeded 1.5 percent in the last three months, while property prices in Taipei climbed 7 percent in the past year to a record, a Sinyi Realty Co. index shows. Taiwan will sell NT$35 billion ($1.2 billion) of five-year debt on June 24, and have another offering of such notes in July.

“The central bank won’t suddenly raise rates, so investors will be interested in hearing what it says on inflation and property prices to see if there are any hints of a future rate increase,” said Kevin Chan, a Taipei-based bond trader at Sinopac Securities Corp. “There may be too much supply of five-year bonds after next week’s auction.”

The yield on the 1.5 percent sovereign securities due March 2024 rose six basis points, or 0.06 percentage point, this week and two basis points today to 1.614 percent, prices from GreTai Securities Market show. That’s the biggest weekly increase for a benchmark 10-year note since the period ended Sept. 7.

Taiwan will release its third-quarter bond sale schedule on June 23. Export orders increased 4.7 percent from a year earlier in May, compared with 8.9 percent growth in the previous month and the 7.2 percent median estimate in a Bloomberg survey, a report showed today.

The island’s dollar was little changed this week and fell

0.1 percent today to NT$30.065 against its U.S. counterpart, according to prices from Taipei Forex Inc. One-month non-deliverable forwards were steady this week and declined 0.1 percent today to NT$29.981.

One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, slipped three basis points this week and four basis points today to 2.72 percent, data compiled by Bloomberg show.