Bloomberg News

Taiwan Money Rate Drops to Lowest Since October on Easing Odds

July 20, 2012

Taiwan’s overnight money-market rate dropped to the lowest level since October on speculation the central bank will cut borrowing costs to boost economic growth. The currency snapped a two-week loss.

Export orders fell 2.6 percent in June from a year earlier, a fourth monthly decline, official data showed today. The government and legislature will discuss stimulus measures next week, a Cabinet official said yesterday, asking not to be named because of a lack of authorization to speak. Policy makers left interest rates unchanged at 1.875 percent last month, and are scheduled to meet again in September.

The lending rate declined nine basis points, or 0.09 percentage point, this week to 0.39 percent as of 4:08 p.m. local time, according to a weighted average compiled by the Taiwan Interbank Money Centre. That is the lowest level since Oct. 19. It dropped one basis point today.

“Some bond traders are speculating on a rate cut,” said George Pu, a bond trader at Sinopac Securities Corp. in Taipei. “The overnight rate needs to slip below 0.4 percent to warrant a drop in borrowing costs.”

First-quarter economic expansion was the slowest since 2009, and the statistics bureau cut its 2012 growth forecast to 3.03 percent in May from 3.38 percent.

The Taiwan dollar strengthened 0.1 percent to NT$29.995 against its U.S. counterpart for the week, according to Taipei Forex Inc. It was little changed today. One-month implied volatility, a measure of exchange-rate swings used to price options, declined ten basis points to 3.12 percent today.

The yield on the 2 percent bonds due July 2017 rose two basis points during the five-day period to 0.875 percent, according to Gretai Securities Market. It touched 0.842 percent on July 18, the lowest level for benchmark five-year rates since October 2010.

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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