Taiwan’s government bonds gained, with 10-year yields dropping to the lowest in more than a month, on speculation the central bank will follow South Korea in cutting interest rates. The local dollar was little changed.
Bank of Korea unexpectedly lowered the benchmark seven-day repurchase rate to 3 percent today, the first reduction since February 2009. Taiwan’s exports contracted for a fourth month in June, while inflation was the highest since January, official data showed in July.
“There’s speculation among traders that Taiwan’s central bank will follow South Korea,” said George Pu, a bond trader at Sinopac Securities Corp. in Taipei. “However, inflation is still a problem and the central bank has to take that into consideration.”
The yield on 1.25 percent notes due March 2022 fell one basis point, or 0.01 percentage point, to 1.176 percent as of 9:54 a.m. in Taipei, according to Gretai Securities Market. That’s the lowest for a benchmark 10-year yield since June 8.
Taiwan’s monetary authority kept borrowing costs unchanged at 1.875 percent at a quarterly meeting last month. The consumer price index rose 1.77 percent in June from a year earlier, following a 1.74 percent increase the previous month.
The currency traded at NT$29.971 against its US counterpart, compared with NT$29.974 yesterday, according to Taipei Forex Inc. One-month implied volatility, a measure of exchange-rate swings used to price options, held at 3.8 percent.
The overnight interbank lending rate was little changed at 0.506 percent, according to a weighted average compiled by the Taiwan Interbank Money Centre.