Bloomberg News

Taiwan Bonds Snap Six-Day Drop on Europe Jitters; Currency Falls

October 12, 2011

Oct. 12 (Bloomberg) -- Taiwan’s government bonds snapped a six-day slide and the local dollar weakened on concern Europe’s debt crisis and a slowdown in the U.S. economy will sap demand for the island’s exports.

The Taiex index of shares retreated today amid uncertainty that Slovakia will ratify the euro area’s revised bailout fund. Indonesia unexpectedly cut its benchmark interest rate by 25 basis points to 6.5 percent yesterday and the nation’s government said last month it was preparing measures to support the economy. Philippine President Benigno Aquino unveiled today a 72.1 billion-peso ($1.7 billion) stimulus package to protect economic growth.

“Investors are concerned about Asia’s growth prospects,” said Albert Lee, a Taipei-based fixed-income trader at Cathay United Bank Co. “The fall in both Taiwan stocks and U.S. stock futures increased demand for bonds.”

The yield on the government’s 2 percent bonds due July 2016, the most-traded securities, dropped one basis point, or 0.01 percentage point, to 1.04 percent, prices from Gretai Securities Market show. The rate touched 1.05 percent yesterday, the highest level for benchmark five-year debt since Aug. 17.

Taiwan’s dollar weakened 0.2 percent to NT$30.400 against its U.S. counterpart, according to Taipei Forex Inc. It touched this year’s low of NT$30.722 on Oct. 4.

The overnight money-market rate, which measures interbank funding availability, was little changed at 0.392 percent, according to a weighted average compiled by the Taiwan Interbank Money Center.

--Editors: James Regan, Anil Varma

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

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


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