Taiwan’s 10-year bonds fell by the most in three months as US jobs data fueled speculation that the US Federal Reserve will raise interest rates.
The yield on similar-maturity US Treasuries posted its biggest increase in three months on Friday last week, as data showed employers in the US added 321,000 jobs last month, exceeding all 100 estimates in a Bloomberg survey of economists and an addition of 214,000 in October. Rising rates on US Treasuries erode the appeal of lower-yielding Taiwanese debt.
“The [US] non-farm payrolls report has made the market bring forward expectations of a Fed rate increase back to about June next year,” EnTie Commercial Bank (安泰銀行) bond trader Daniel Wu said.
The yield on Taiwan’s 1.625 percent sovereign notes due in September 2024 advanced five basis points, or 0.05 percentage points, to 1.645 percent, GRETAI Securities Market prices show. That is the biggest increase since Sept. 5. The yield on 10-year US government debt rose three basis points today to 2.34 percent, after climbing seven basis points on Friday.
In the currency market, the New Taiwan dollar fell 0.3 percent to NT$31.285 against the US dollar, the weakest level since October 2010, Taipei Forex Inc prices show. One-month non-deliverable forwards were little changed at NT$31.220, after declining 0.7 percent last week, the biggest loss since March, according to data compiled by Bloomberg.
The New Taiwan dollar is on the verge of overtaking the yuan as Asia’s best carry-trade target given its lower risk of interest-rate and currency volatility. A strategy of borrowing the New Taiwan dollar to invest in higher-yielding alternatives has generated the second-highest return over the past month among Asian currencies behind the yuan, based on the Sharpe ratio that measures risk-adjusted relative returns. The New Taiwan dollar may soon replace its Chinese peer as the region’s favored carry trade tool, analysts say, citing Beijing’s efforts to support the yuan that can create wild swings in borrowing costs. In contrast,
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