Bloomberg News

Taiwan Bonds Decline, Currency Advance on Europe Debt Optimism

July 30, 2012

Taiwan’s bonds fell the most in nine months and the local dollar rallied on optimism European policy makers will take action to ease the region’s debt turmoil.

German Chancellor Angela Merkel and Italian Prime Minister Mario Monti yesterday backed European Central Bank President Mario Draghi’s approach to combat the sovereign debt crisis, saying they will do what’s needed to protect the 17-nation euro. Taiwan’s government may report tomorrow that the island’s economy grew about 0.5 percent last quarter from a year earlier, following a 0.39 percent expansion in the previous three months, a Bloomberg survey of economists showed.

“Investors are embracing riskier assets today as there’s a surge of optimism in the market,” said George Pu, a bond trader at Sinopac Securities Corp. in Taipei. “The market is also waiting to see if Taiwan’s economy is going as bad as we think.”

The yield on the 1.25 percent bonds due March 2022 rose three basis points, or 0.03 percentage point, to 1.169 percent, the highest level since July 12, according to Gretai Securities Market. That’s the biggest increase in the benchmark 10-year rate since Oct. 24, according to data compiled by Bloomberg.

The Taiwan dollar rose 0.1 percent to NT$30.080 against its U.S. counterpart after touching NT$30.24 on July 26, the weakest level in almost seven months, according to Taipei Forex Inc. One-month implied volatility, a measure of exchange-rate swings used to price options, dropped seven basis points to 4 percent.

The overnight money-market rate slipped one basis point to 0.39 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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