Bloomberg News

Taiwan 10-Year Yield Reaches Eight-Month High on Growth Outlook

March 07, 2013

Taiwan’s government bonds fell for a fourth day, pushing the benchmark 10-year yield to the highest level in eight months, on optimism demand for the island’s exports will improve as the U.S. economy recovers.

Payrolls in the U.S., the island’s second-biggest overseas market, increased by 165,000 in February after a 157,000 gain the prior month, while the jobless rate likely held at 7.9 percent, separate Bloomberg News surveys showed before data due today. Global funds bought $42 million more Taiwanese stocks than they sold yesterday, taking net purchases this year to $2 billion, according to exchange data.

“Recent U.S. data has been quite encouraging,” said Stanford Chen, fixed-income manager at KGI Securities Co. in Taipei. “Yields may not have a lot of room to rise further” if investors stick with a buy-and-hold strategy, he said.

The yield on the 1.125 percent notes due March 2023 rose one basis point to 1.231 percent as of 9:41 a.m. local time, the highest level since July 4, according to prices from Gretai Securities Market. It climbed two basis points this week.

Earlier this week, a private report from ADP Research Institute showed U.S. employers added 198,000 jobs last month, topping the median economist forecast for 170,000.

Taiwan’s exports dropped 15.8 percent last month from a year earlier, following a 21.8 percent increase the previous month, official data showed yesterday. The decline was probably due to seasonal factors, Credit Agricole CIB analysts led by Adam Myers in London wrote in a note.

Currency Market

The Taiwan dollar climbed 0.2 percent today and 0.1 percent from the end of last week to NT$29.632 against its U.S. counterpart, based on prices from Taipei Forex Inc. It touched NT$29.77 on March 5, the weakest level since September. One- month non-deliverable forwards were unchanged at NT$29.63, according to data compiled by Bloomberg. The contracts gained 0.1 percent during the five-day period.

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.

One-month implied volatility in the Taiwan dollar, a measure of expected moves in the exchange rate used to price options, rose three basis points, or 0.03 percentage point, to 3.95 percent today. The gauge slumped 83 basis points this week.

The overnight interbank lending rate was steady at 0.388 percent, according to the 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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