Taiwan Bonds Fall in Conservative Tone Amid Central Bank Policy

Taiwan’s 10-year government bonds fell after the central bank kept what is seen as the de-facto benchmark rate on overnight certificates of deposit unchanged.

The Central Bank of the Republic of China (Taiwan) lowered its key discount rate by 12.5 basis points on Thursday to 1.5 percent, almost double the yield on 10-year notes. While it cut rates on 28-, 91- and 182-day certificates of deposit by 0.07 percentage point each, the same as in December, it left the overnight equivalent at 0.2 percent. The rate is seen as the actual benchmark because the central bank rate cannot be used by anyone in the market, according to Yuanta Securities Co.

"After the discount rate cut, the overnight rate didn’t move, so bond traders are now quite conservative,” said Tobby Lin, a fixed-income trader at Yuanta Securities in Taipei. “The overnight rate is already close to zero, so there’s limited space for further declines and the room for additional monetary easing is narrowing.”

While Taiwan’s economy expanded last year at the slowest pace since a contraction in 2009 and exports have slumped for 13 straight months, the island has still lured $4.2 billion to local stocks this year, the most among eight Asian markets, Bloomberg-compiled data show. CBC Governor Perng Fai-nan said monetary easing can help narrow Taiwan’s rate gap with the rest of the world and curb inflows. Such language suggests inflows and the Exchange Exchange An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv Read this Term rate "have taken over as the primary consideration in future rate decisions," said Gary Yau, a strategist at Credit Agricole CIB in Hong Kong.

The 10-year yield rose two basis points to 0.82 percent and the five year yield climbed three basis points to 0.54 percent, Taipei Exchange prices show. Taiwan’s dollar fell 0.1 percent to NT$32.766 versus the greenback, taking the week’s loss to 0.8 percent, according to prices from Taipei Forex Forex Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Read this Term Inc.

To contact the reporter on this story: Justina Lee in Taipei at jlee1489@bloomberg.net. To contact the editors responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net, Simon Harvey, Naoto Hosoda

By: Justina Lee

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