Taiwan’s 10-year bonds fell the most in six weeks after a government debt sale missed its target on signs insurers are favoring higher-yielding foreign-currency notes.
The Ministry of Finance yesterday sold NT$31.8 billion (US$1 billion) of securities due 2035, less than its NT$40 billion goal, the central bank said in a statement.
Local insurers bought 18.9 percent of the bonds, compared with an average of 27.6 percent for 20-year debt sales over the past five years. Firms including HSBC Holdings PLC and PCCW Ltd (電訊盈科) have sold US$2.5 billion of foreign-currency paper in Taiwan this year following a record US$24 billion of issuance last year.
“Demand at the 20-year bond auction was poor partly because of the substitution effect from international bonds,” said Daniel Wu, a fixed-income trader at EnTie Commercial Bank (安泰銀行) in Taipei. “It’s also partly because insurers may be strategically waiting for other long-tenor and international bonds with better yields.”
Ten-year sovereign bonds declined after the auction, pushing the yield up 5 basis points to 1.548 percent at the close, GRETAI Securities Market prices show. That is the biggest increase since Dec. 8.
The government sells less debt than planned when the highest bid exceeds a cutoff yield. Investors bid for 1.03 times the amount of bonds offered, the lowest ratio in data compiled by Bloomberg going back to 2000.
The notes were sold at 2.08 percent, exceeding the 2.07 percent median estimate in a Bloomberg News survey of 11 fixed-income traders. Taiwan is planning to sell NT$40 billion of 30-year sovereign securities next month.
Companies have flocked to Taiwan to issue global bonds since local regulators excluded them from insurers’ overseas investment quotas in May. PCCW paid a yield of 4.6 percent when it sold 15-year dollar notes this month.
In the forex market, the New Taiwan dollar halted four days of gains to weaken 0.5 percent, the most in two weeks, to NT$31.696 against its US counterpart, according to Taipei Forex Inc.
One-month non-deliverable forwards fell 0.7 percent to NT$31.681, according to data compiled by Bloomberg.
The Bloomberg Dollar Spot Index advanced 0.2 percent on speculation the European Central Bank would expand quantitative easing when it meets tomorrow, while the US Federal Reserve prepares to tighten this year.
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