Taiwan 10-Year Yield at One-Week Low Amid Bank Demand at Auction

Taiwan’s 10-year bonds rose, pushing the yield to a one-week low, as demand from banks increased at a government debt sale.

The finance ministry sold 10-year securities today at a yield of 1.725 percent, lower than the 1.75 percent median estimate in a Bloomberg survey of 11 traders. Banks bought 65 percent of the notes, compared with the 56 percent average at three previous auctions of similar-maturity debt. The ministry will release its fourth-quarter issuance schedule today. The central bank will hold its benchmark rate at 1.875 percent on Sept. 25, according to all 22 analysts in a separate survey.

The yield on the island’s 1.625 percent notes due September 2024 declined one basis point, or 0.01 percentage point, to 1.73 percent in the secondary market, the lowest level since Sept. 16, GreTai Securities Market prices show.

“It would take strong bullish factors for the yield to drop further,” said Daniel Wu, a Taipei-based bond trader at EnTie Commercial Bank. “There are still some variables such as the bond issuance plan and the central bank’s board meeting.”

Demand for the notes from lenders may be primarily due to purchases by the state-backed Chunghwa Post Co., Wu added. The postal services company, which takes deposits, had NT$6.2 trillion ($205 billion) of assets as of Dec. 31, 2013.

In the currency market, Taiwan’s dollar was little changed at NT$30.240 against its U.S. counterpart, prices from Taipei Forex Inc. show. One-month non-deliverable forwards were steady at NT$30.234, according to data compiled by Bloomberg.

One-month implied volatility, a gauge of expected swings in the exchange rate used to price options, declined 11 basis points to 3.01 percent.

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