Taiwan Bond Yield Falls Most in Three Weeks on Bank Demand

Taiwan’s bonds rose, pushing the 10-year yield down by the most in almost three weeks, after a debt auction showed strong demand from banks.

The finance ministry sold NT$35 billion ($1.15 billion) of notes due 2024 at 1.658 percent yesterday, compared with the 1.65 percent median estimate in a Bloomberg survey of traders and the 1.725 percent in a Sept. 23 sale of similar-maturity debt. Banks bought 75 percent of the securities, the highest proportion of a 10-year debt sale since at least 2000. The International Monetary Fund last month cut its forecast for 2015 global economic growth to 3.8 percent from 4 percent.

“Investors are attracted by current yields,” said Daniel Wu, a Taipei-based fixed-income trader at EnTie Commercial Bank. “The entire environment has changed since the last auction because the market has lowered global outlook expectations.”

The yield on sovereign notes maturing in September 2024 dropped three basis points, or 0.03 percentage point, to 1.62 percent, GreTai Securities Market prices show. That’s the biggest decline for benchmark 10-year bonds since Oct. 16.

Government data today showed consumer prices climbed 1.07 percent in October, less than the 1.2 percent median estimate in a Bloomberg survey of economists. Slower-than-expected inflation also prompted investors to buy bonds for short-term trading, according to a KGI Securities Co. note today.

Currency Weakens

Taiwan’s dollar depreciated for a fifth day, dropping 0.2 percent to NT$30.602 against its U.S. counterpart, the weakest close since March 26, prices from Taipei Forex Inc. show. The currency slipped 0.3 percent in the last 33 minutes of trading today amid suspected central bank intervention.

The won fell to a nine-month low today while the yen touched the weakest level since 2007. Taiwan’s electronics exporters compete globally with rivals from South Korea and Japan.

One-month non-deliverable forwards declined 0.2 percent to NT$30.559, data compiled by Bloomberg show. One-month implied volatility, a gauge of expected swings in the exchange rate used to price options, advanced four basis points to 3.55 percent.

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