Bloomberg News

Taiwan 10-Year Bond Yield Rises to 21-Month High on Fed Outlook

June 21, 2013

Taiwan’s 10-year bond yield rose this week to a 21-month high and the local dollar fell as Federal Reserve Chairman Ben S. Bernanke said the central bank may taper its stimulus this year.

Bernanke said June 19 that $85 billion a month of debt purchases, known as quantitative easing, may be trimmed this year and ended in 2014 if the U.S. economy performs in line with estimates. Global funds sold $1.4 billion more Taiwanese stocks than they bought this week, taking net sales this month to $3.2 billion, according to exchange data.

“The prospect of less quantitative easing has caused outflows and selloffs in Asian assets, including Taiwan’s,” said Tobby Lin, a fixed-income trader at Yuanta Securities Co. in Taipei. “But in a way, Taiwan’s being hurt less than countries in Southeast Asia and South Korea.”

The yield on the 1.125 percent notes due March 2023 climbed seven basis points, or 0.07 percentage point, this week to 1.427 percent in Taipei, according to Gretai Securities Market prices. That’s the highest yield for a benchmark 10-year note since September 2011. The rate rose four basis points today.

The Taiwan dollar fell 1 percent since June 14 to NT$30.28 against its U.S. counterpart, Taipei Forex Inc. prices show. The currency weakened 0.4 percent today, after trading 0.3 percent stronger one minute before the 4 p.m. close. The central bank has sold the currency in the run-up to the close on most days in the past year, according to traders who asked not to be identified.

Forwards Fall

One-month non-deliverable forwards dropped 1.1 percent this week to NT$30.18 against the greenback, according to data compiled by Bloomberg. The contracts were steady today. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, rose 94 basis points to 5.7 percent since June 14 and fell six basis points today.

The overnight interbank lending rate was little changed at 0.384 percent, according to a weighted average compiled by 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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