Taiwan’s 10-year government bonds headed for their biggest monthly decline since September last year as appetite for local debt waned amid speculation the US will soon raise interest rates.
US jobs figures that beat forecasts last month heightened odds that the US Federal Reserve will tighten its policy this year.
Fed Chair Janet Yellen this week indicated such a move might not happen until the second half of this year.
Taiwan’s bonds also fell as insurance companies favored higher-yielding debt issued by overseas firms, according to First Commercial Bank, which sees demand coming for local securities from state-backed Chunghwa Post Co (中華郵政).
“US Treasury yields rose because of the non-farm payrolls data,” which caused Taiwan bonds to fall, Taipei-based First Commercial Bank fixed-income trader Jerry Lin said.
Insurers will be less interested as more foreign issuance comes in, he said.
Taiwan’s 10-year yield rose 11 basis points, or 0.11 percentage points, this month to 1.585 percent as of 12:24pm, Taipei Exchange prices show. The yield dropped by one basis point yesterday.
The market is closed today for 228 Memorial Day.
Insurers are seeking foreign-currency bonds after regulators in May last year excluded securities from overseas investment quotas. The local insurance industry had NT$18.6 trillion (US$592 billion) of assets as of Dec. 31 last year, according to the Taiwan Insurance Institute (保發中心).
Chunghwa Post is a deposit- taking firm with NT$6.2 trillion (US$197.7 billion) as of the end of 2013.
Overseas companies such as AT&T Inc of the US, Deutsche Bank AG, Goldman Sachs Inc and HSBC Holdings PLC have issued US$8.4 billion of foreign-currency debt in Taiwan this year. Of the 16 30-year dollar notes sold, the average yield was 4.3 percent, compared with 2.37 percent on similar local sovereign securities, data from the exchange and Bloomberg show.
The New Taiwan dollar headed for a second monthly gain, rising 0.4 percent to NT$31.435 compared with the US dollar, Taipei Forex Inc prices showed.
One-month forwards climbed 0.9 percent to NT$31.457, according to Bloomberg-compiled data.
In related news, the TAIEX closed down 77.44 points, or 0.79 percent, at 9,622.10 yesterday on turnover of NT$94.54 billion, Taiwan Stock Exchange data showed.
The retreat put an end to two consecutive sessions of gains, as investors turned conservative ahead of the day off today, analysts said.
Investors tend to stay on the sidelines over the break to avoid unfavorable developments at home and abroad hurting their portfolio, analysts said.
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