Taiwan 10-year bonds fall on speculation

The yield's advantage over Japanese bonds of similar maturity fell to 1.29 basis points Wednesday, the smallest since April 2006, according to data compiled by Bloomberg. Bank of Japan kept its benchmark interest rate at 0.1 percent this month, while the Central Bank of the Republic of China (Taiwan) in Taipei has held its borrowing costs at a record-low 1.25 percent since February.

“Prices of Taiwan bonds may be too high,” said Eric Hsing, a debt trader at First Securities Inc. in Taipei. “Japan has zero interest rates but we don't.”

The yield on the 1.375 percent bond maturing September 2019 climbed one basis point to 1.378 percent, according to Gretai Securities Market, Taiwan's biggest exchange for bonds. Its price fell 0.1011, or NT$101.1 per NT$100,000 face amount, to 99.9760. A basis point is 0.01 percentage point.

Japanese government bonds fell, led by 10-year futures contracts, on speculation an increase in debt issuance will overwhelm investor demand.

Taiwan's 10-year bond yield declined Wednesday to the lowest level in eight days on speculation lenders invested excess funds in the debt as the monetary authority kept interest rates low.

Taiwan's dollar fell, erasing earlier gains, on concern the central bank may stall the currency's appreciation.

Funds from abroad bought US$12.7 billion more local equities than they sold this year, lifting the benchmark TAIEX stock index 66 percent and the Taiwanese currency 1.4 percent. The central bank will “maintain order” if irregular factors cause excessive volatility in the foreign-exchange market, the monetary authority said Sept. 30.

“People are cautious because of concern that the authority may take some moves,” said Tarsicio Tong, a currency trader at Union Bank of Taiwan in Taipei.

The local dollar weakened 0.1 percent to NT$32.403 against its U.S. counterpart as of 4 p.m. local time, according to Taipei Forex Inc. The currency reached NT$31.995 on Oct. 1, its strongest level in a year.

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