Bloomberg News

Taiwan Bonds Gain in Month, Currency Drops as Economy Contracts

July 31, 2012

Taiwan’s 10-year bonds rose this month and the currency weakened as official data showed the economy unexpectedly declined in the second quarter.

Gross domestic product fell 0.16 percent from a year earlier in the three months through June, after increasing 0.39 percent in the previous quarter, the statistics bureau said today. The median estimate in a Bloomberg News survey of 13 economists was for a 0.5 percent expansion.

“The really bad GDP numbers are affecting the bond market today,” said James Wang, a debt trader at Yuanta Securities Co. in Taipei. “Slowing global growth and the European debt crisis is hurting the earnings outlook of Taiwan’s exporters; that’s providing a bullish environment for bonds as well.”

The yield on the 1.25 percent bonds due March 2022 fell five basis points, or 0.05 percentage point, this month to 1.176 percent, according to Gretai Securities Market. The rate was little changed today. The benchmark 10-year rate has dropped six basis points, or 0.06 percentage point, in July, according to data compiled by Bloomberg.

The Taiwan dollar slid 0.4 percent to NT$30.010 against its U.S. counterpart from a month ago, according to Taipei Forex Inc. The currency gained 0.2 percent today. It touched NT$30.24 on July 26, the weakest level since Jan. 9.

One-month implied volatility, a measure of exchange-rate swings used to price options, fell 30 basis points for the month to 3.60 percent.

The overnight money-market rate fell 12 basis points to 0.39 percent, the biggest monthly decline since January 2009, 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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