Bloomberg News

Taiwan Bonds Drop This Week on U.S. Earnings, Export Outlook

October 19, 2012

Taiwan’s bonds had their first weekly drop in more than a month as U.S. earnings and forecasts for a rebound in exports brightened the economic outlook.

The 10-year yield reached the highest level in more than two weeks yesterday after China, Taiwan’s biggest trading partner, reported third-quarter growth of 7.4 percent, matching estimates. Of the 104 companies listed in the S&P 500 index that released results since Oct. 9, 75 posted earnings that exceeded analysts’ predictions, data compiled by Bloomberg show. Official figures today showed Taiwan’s export orders rose for the first time in seven months in September, climbing 1.9 percent from a year earlier.

“Taiwan bond yields have been trending up this week because there was some good news from the earnings results of American companies, pushing U.S. bond yields up,” said Jerry Lin, a fixed-income trader in Taipei at First Commercial Bank. “The economic data aren’t getting worse, and maybe that would mean Taiwan bond yields bottomed out as well.”

The yield on the 1.125 percent bonds due September 2022 rose one basis point to 1.148 percent this week in Taipei, according to Gretai Securities Market. The rate was at 1.151 percent yesterday, the highest level since Oct. 2. The yield on 10-year U.S. Treasuries climbed 15 basis points this week to 1.81 percent, prices compiled by Bloomberg showed.

Taiwan Dollar

Taiwan’s dollar strengthened 0.3 percent this week to NT$29.286 against its U.S. counterpart, data from Taipei Forex Inc. show. It fell 0.1 percent today.

One-month implied volatility in the currency, a measure of exchange-rate swings used to price options, climbed seven basis points, or 0.07 percentage point, to 3.58 percent this week.

One-month non-deliverable forwards declined 0.1 percent in the past five days to NT$29.195, according to data compiled by Bloomberg.

The overnight interbank lending rate increased was little changed at 0.391 percent this week, a weighted average compiled by the Taiwan Interbank Money Center shows.

To contact the reporters on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net; Argin Chang in Taipei at achang153@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net


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