Bloomberg News

Taiwan Government Bonds Decline on Fastest Inflation Since 2008

August 06, 2012

Taiwan’s bonds fell, with 10-year yields rising to an almost four-week high, on speculation the central bank will leave interest rates unchanged after inflation quickened more than forecast. The local dollar strengthened.

The consumer-price index rose 2.46 percent from a year earlier, the most since September 2008, the Statistics Bureau said today. The median estimate of economists in a Bloomberg survey was for a 1.95 percent gain. Stock indexes rallied across Asia after better-than-expected U.S. jobs data eased concern that growth is slowing in the world’s largest economy.

“The high CPI number has killed expectations of a rate cut,” said Samson Tu, a Taipei-based fund manager at Uni- President Assets Management Corp., who helps manage $1.6 billion of fixed-income assets. “Good U.S. data is also helping drive the stock-market rally today, leading to higher bond yields.”

The yield on the 1.25 percent bonds due March 2022 climbed three basis points, or 0.03 percentage point, to 1.19 percent, according to Gretai Securities Market. That’s the highest level since July 10. The government will auction NT$30 billion ($1 billion) of 20-year debt tomorrow.

Taiwan’s central bank left borrowing costs unchanged at 1.875 percent in June, and is scheduled to discuss monetary policies again in September.

The Taiwan dollar strengthened 0.1 percent to NT$29.96 against its U.S. counterpart, according to Taipei Forex Inc. One-month implied volatility, a measure of exchange-rate swings used to price options, dropped six basis points to 3.64 percent.

The overnight money-market rate fell one basis point to 0.387 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: James Regan at jregan19@bloomberg.net


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