Bloomberg News

Taiwan 10-Year Bond Yield Rises From One-Month Low on Inflation

March 05, 2013

Taiwan’s government bonds fell, with the 10-year yield rising from a one-month low, as a report showed consumer prices rose more than analysts estimated. The local dollar strengthened.

Annual inflation was 2.97 percent in February, compared with the median estimate of 2.8 percent in a Bloomberg News survey and a revised 1.13 percent in January, official data showed today. The Chinese New Year holiday, which typically drives up food costs, was in February this year and January in 2012. Stock indexes advanced across Asia today as investors bet central banks across the world will continue stimulus measures to boost their economies.

“There’s a jump in the CPI index, but it’s probably due to seasonally adjusted factors,” said James Wang, a fixed-income trader at Yuanta Securities Co. in Taipei. “Traders reckoned there wasn’t much room for yields to go much lower anymore. Stocks are doing pretty good today.”

The yield on the 1.125 percent bonds due March 2023 was 1.207 percent, compared with 1.201 yesterday, according to Gretai Securities Market. Yesterday’s level was the lowest for a benchmark 10-year note since Feb. 1.

The Taiwan dollar gained 0.2 percent to NT$29.72 against its U.S. counterpart, based on prices from Taipei Forex Inc. It touched NT$29.77 yesterday, the weakest level in almost six months. One-month non-deliverable forwards rose 0.2 percent to NT$29.65, according to data compiled by Bloomberg.

The central bank has sold the local currency near the close on most days in the past 11 months, according to traders who asked not to be identified.

Bond Buying

Federal Reserve Vice Chairman Janet Yellen said the U.S. central bank should press on with $85 billion in monthly bond buying while tracking possible costs and risks from the unprecedented program. China maintained its economic-growth target at 7.5 percent for 2013, while setting a lower inflation goal of 3.5 percent, setting up a challenge for new leaders to keep prices in check without harming expansion.

One-month implied volatility in the Taiwan dollar, a measure of expected moves in the exchange rate used to price options, dropped 16 basis points, 0.16 percentage point, to 4.69 percent. The overnight interbank lending rate was steady at 0.388 percent, according to Taiwan Interbank Money Center.

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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