Wed, Oct 19, 2016 - Page 12 News List

Ten-year bond yield posts biggest rise in three years

Bloomberg

Taiwanese government bonds slumped, sending the 10-year yield up by the most since September 2013, on speculation that policymakers would refrain from adding to easing and as concern about an uptick in inflation spurs a global bond selloff.

The yield on Taiwanese sovereign securities due in a decade surged 8 basis points yesterday to 0.9 percent, its steepest climb in three years and the highest close since February, exchange data show.

As recently as August, the debt yielded a record-low 0.625 percent.

Investors in global government bonds have lost 2.8 percent so far this month, a Bloomberg Barclays Index shows, with declines extending after US Federal Reserve Chair Janet Yellen indicated in a speech on Friday a willingness to let US growth run hot. Her remarks pushed a debt-market gauge of inflation expectations to the highest in more than five months.

In Taipei, 10-year bonds are headed for their worst month in three years after the central bank held the policy rate last month following four straight quarters of reductions.

“Taiwan won’t cut rates any more, so the market is correcting the excessive drop in yields earlier,” said Tobby Lin, a fixed-income trader at Yuanta Securities Co (元大證券) in Taipei.

“Traders are facing stop-loss pressure,” and are bearish ahead of a sale of five-year bonds later this week, he added.

The Ministry of Finance missed its target at a sale of two-year notes last week as investors asked for higher yields than the government was prepared to offer.

The yield on 2021 notes yesterday jumped 4 basis points to 0.64 percent — the highest since December.

Global yields have surged this month as the odds of a interest-rate hike this year implied by Fed fund futures climbed to 66 percent.

The central bank held its key rate last month, citing an improving outlook for exports and limits to the effectiveness of easing.

Taiwan is to sell NT$30 billion (US$947.3 million) of five-year bonds tomorrow.

“Traders have been waiting to stop their losses, but every day the yield has been going up,” Lin said. “Recent auction results have been poor, so perhaps people are thinking if they don’t sell now, it’ll be harder after Thursday’s sale.”

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