Bloomberg News

Taiwan Bonds Gain Before This Week’s Rate Review; Currency Rises

September 28, 2011

Sept. 28 (Bloomberg) -- Taiwan’s government bonds rose on speculation the central bank will leave borrowing costs unchanged as the global economic recovery falters. The local currency strengthened for a second day.

The island’s monetary authority will end a run of five interest-rate increases at a quarterly review tomorrow, according to 14 of 17 economists surveyed by Bloomberg. The rest predict an increase of 0.125 percentage point. Policy makers in Indonesia, South Korea and the Philippines all left borrowing costs unchanged this month on concern a stagnant U.S. economy and Europe’s debt crisis will sap demand for exports from Asia.

“There’s not much the Taiwan central bank can do but to follow its Asian peers in halting rate increases,” said Albert Lee, a Taipei-based fixed-income trader at Cathay United Bank Co. “Movements of yields will be largely affected by whether European officials come up with a strong solution to the debt crisis.”

The yield on the 1.25 percent notes due September 2021 was 1.283 percent from 1.285 percent yesterday as of the 1:30 p.m. close in Taipei, prices from Gretai Securities Market show.

Taiwan’s dollar advanced 0.2 percent to NT$30.410 against its U.S. counterpart, according to Taipei Forex Inc. The currency has dropped 4.6 percent this month and 5.3 percent this quarter.

The overnight money-market rate, which measures interbank funding availability, gained one basis point to 0.399 percent, according to a weighted average compiled by the Taiwan Interbank Money Center.

--Editors: Ven Ram, Andrew Janes

To contact the reporter on this story: Andrea Wong in Taipei at awong268@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net


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