Bloomberg News

Taiwan Bond Yields Drop From Five-Week High; Currency Weakens

July 05, 2012

The yield on 10-year Taiwanese government bonds dropped from a five-week high as a report showed inflation accelerated less than economists estimated. The island’s dollar weakened.

The consumer-price index climbed 1.77 percent from a year earlier in June, compared with 1.74 percent in May, official data showed today. That was less than the 1.78 percent median estimate in a Bloomberg survey. Most Asian stock indexes fell today after reports showed euro-area services and manufacturing output shrank in June for a fifth month and services unexpectedly contracted in Germany.

“Inflation isn’t as big of a concern anymore,” said James Wang, a debt trader at Yuanta Securities Co. in Taipei. “Some short-sellers are buying back bonds as they see yields can’t go up too much after all.”

The yield on the 1.25 percent bonds due March 2022 dropped one basis point, or 0.01 percentage point, to 1.225 percent in Taipei, according to Gretai Securities Market. Benchmark 10-year rates reached 1.232 percent yesterday, the highest level since May 29.

The Taiwan dollar slipped 0.1 percent to NT$29.890 against its U.S. counterpart, according to Taipei Forex Inc. It touched NT$29.740 earlier, the strongest level since June 21. One-month implied volatility, a measure of exchange-rate swings used to price options, was steady at 3.8 percent.

The overnight interbank lending rate was little changed at 0.509 percent, according to a weighted average compiled by the Taiwan Interbank Money Centre.

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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