Bloomberg News

Taiwan Bonds Rise, Currency Drops Before Monetary-Policy Review

December 29, 2011

Dec. 29 (Bloomberg) -- Taiwan’s government bonds rose for a third straight day and the currency dropped as economists predicted the central bank will leave borrowing costs unchanged at a review today.

The monetary authority will keep its benchmark discount rate to banks at 1.875 percent, according to 11 of 15 economists in a Bloomberg survey. Four predicted a cut to 1.750 percent. Stock indexes fell across Asia as a surge in the European Central Bank’s balance sheet to a record highlighted the growing risks from the sovereign-debt crisis.

“It’s very unlikely the central bank will cut rates this time, maybe in March when they have a meeting again,” said George Pu, a Taipei-based bond trader at Sinopac Securities Corp. “Concerns about Europe triggered some safety demand.”

The yield on the 1 percent notes maturing in January 2017, the most-traded government securities, dropped one basis point, or 0.01 percentage point, to 0.965 percent as of 9:23 a.m. local time, according to prices from Gretai Securities Market. That was the lowest level for benchmark five-year rates since Sept. 26.

The monetary authority may halt the sale of monthly 364-day certificates of deposits next year to maintain the availability of cash in the system, Pu said.

Taiwan’s dollar depreciated 0.1 percent to NT$30.347 against its U.S. counterpart, according to Taipei Forex Inc. It has advanced 0.1 percent in 2011.

The overnight money-market rate, which measures interbank funding availability, was steady at 0.4 percent, according to a weighted average compiled by the Taiwan Interbank Money Center.

--Editors: Ven Ram, Simon Harvey

To contact the reporter on this story: Andrea Wong in Taipei at

To contact the editor responsible for this story: Sandy Hendry at

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