Bloomberg News

Taiwan Bonds Rise, Currency Declines on Global Growth Concerns

September 26, 2012

Taiwan’s government bonds gained, with 10-year yields dropping to almost a three-week low, on speculation stimulus measures announced by global central banks will fail to revive growth. The local dollar weakened.

The Taiex (TWSE) index of shares slumped 0.8 percent today as overseas investors sold $106 million more Taiwanese stocks than they bought, according to exchange data. Federal Reserve Bank of Philadelphia President Charles Plosser yesterday said more bond purchases by the U.S. central bank probably won’t boost growth and may jeopardize its credibility. Monetary authorities in Europe and Japan have unveiled similar programs.

“People are starting to get really concerned about whether the stimulus will work,” said James Wang, a fixed-income trader at Yuanta Securities Co. in Taipei. “End-users, including the post office and insurers, have a strong appetite for bonds as stocks are still not performing well.”

The yield on Taiwan’s 1.125 percent notes due September 2022 fell one basis point, or 0.01 percentage point, to 1.166 percent, according to Gretai Securities Market. That’s the lowest level for benchmark 10-year rates since Sept. 6.

The Taiwan dollar fell 0.2 percent to NT$29.497 against its U.S. counterpart, according to Taipei Forex Inc. It reached NT$29.198 on Sept. 17, the strongest level since May 3, and has appreciated 1.4 percent this quarter. One-month non-deliverable forwards weakened 0.3 percent to NT$29.435, according to data compiled by Bloomberg.

Central bank Governor Perng Fai-nan said today the island’s dollar is less volatile than major currencies. He also said it’s the authority’s mandate to maintain relative stability in the exchange rate and step into the market in the event of abnormal fluctuations.

One-month implied volatility in the currency, a measure of exchange-rate swings used to price options, increased 16 basis points, to 3.76 percent.

The overnight money-market rate was steady at 0.386 percent, a weighted average compiled by the Taiwan Interbank Money Center shows.

-- With assistance from Lilian Karunungan in Singapore. Editors: Amit Prakash, Anil Varma

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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