Bloomberg News

Taiwan Bonds Rise This Week as Power-Tariff Increase Delayed

May 03, 2012

Taiwan’s government bonds were poised for a third weekly gain as the government delayed an increase in electricity prices. The local dollar strengthened for a fourth consecutive week.

Power tariffs will climb from June 10, later than the originally scheduled May 15, and changes will be phased in over a period of more than six months, the government said this week. The currency is set to conclude its longest stretch of weekly appreciation since February after statistics bureau data showed on April 30 the island’s economy expanded 0.36 percent in the first quarter, compared with 1.89 percent in the last three months of 2011.

“People are less worried about inflation now,” said James Wang, a debt trader at Yuanta Securities Co. in Taipei. “The economic outlook is still looking uncertain, both overseas and in Taiwan. That’s going to support a bond rally.”

The yield on the government’s 1 percent bonds due January 2017 fell two basis points, or 0.02 percentage point, to 0.98 percent this week, according to Gretai Securities Market. It was little changed today, and could test 0.95 percent this month, according to Wang.

Taiwan’s dollar strengthened 0.3 percent this week and 0.1 percent today to NT$29.24 against its U.S. counterpart, according to Taipei Forex Inc. The currency touched NT$29.08 on May 2, the strongest level in almost eight months.

One-month implied volatility, a measure of exchange-rate swings traders use to price options, rose 66 basis points during the five-day period to 4.29 percent. It rose four basis points today.

The overnight interbank lending rate slipped one basis point today to 0.501 percent, according to a weighted average compiled by the Taiwan Interbank Money Center. It reached 0.511 percent yesterday, the highest level since 2008.

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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