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Ten-year bonds at lowest level in more than a year

Taiwan's 10-year bonds had their biggest drop in almost one-and-a- half years on concern a stock rally signals the economy can withstand higher interest rates.

Bonds fell for a 10th day as the TAIEX climbed to a five and a half year high, led by electronic component makers amid confidence economic growth will boost corporate earnings. The central bank has lifted interest rates at its past seven quarterly meetings to curb inflation.

"Stocks are doing well giving the central bank more room to push interest rates higher," said Jim Chen, a bond trader at International Bills Finance Corp (國際票券). "The main reason for bonds to fall is the central bank."

The yield on the benchmark 1 3/4 percent bond due March 2016 rose 7.9 basis points, or 0.079 percentage point, to 2.064 percent as of 4pm in Taipei, according to the GRETAI Securities Market, the nation's biggest exchange for bonds. The price fell 0.694, or NT$694 per NT$100,000 face amount, to 97.208. Bond prices move inversely to yields.
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