HALISTER1: INSIDE TAIWAN: Yield Curve Flattens; TWD Falls on USD Strength

INSIDE TAIWAN: Yield Curve Flattens; TWD Falls on USD Strength

(Bloomberg) -- Govt bond yield curve bull-flattens amid speculation banks and life insurers have to buy longer-dated debt; Taiwan dollar weakens as U.S. dollar extends advance.
  • Yield on 20-yr bond falls 3 bps to a fresh record of 1.0125%
    • Yield on 5-yr bond steady at 0.4950%, while 10-yr yield little changed at 0.6380%
  • Local banks need to buy long-end bonds to digest excessive liquidity as average mortgage loan rate falls below 1.7%, says Samuel Lee, bond trader at Yuanta Sec Invest Consulting
    • Expects 10-yr yield to decline toward 0.62% and 5-yr yield to trade within 0.47%-0.50%
  • Yield curve likely to flatten as life insurance companies’ demand for Taiwan govt bonds is rising in August while their appetite for dollar debt declines due to a strong TWD, Standard Chartered analysts led by Kaushik Rudra and Lawrence Lai write in a note today
    • Short-end rates are anchored by ample liquidity and weak growth outlook
    • Outlook for TWD is negative, due to rising nominal effective exchange rate and still anemic growth
  • TWD falls 0.2% to 31.772 per U.S. dollar
  • Overseas investors sell local stocks for fourth day, offloading net NT$300.1m ($9.4m)
    • Taiex index falls 0.2% to 9,017.38
  • Goldman Sachs remains cautious on 2H outlook for Asian exports, economists Irene Choi and Goohoon Kwon wrote in note yday, citing Taiwan’s weaker-than-expected industrial production
    • Chinese stimulus likely to wane and U.S. tech demand seems to be tapering off
  • NOTE: Industrial production declined 0.3% y/y in July vs est. 1.7% growth
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Goohoon Kwon (Goldman Sachs Group Inc/The)
Irene Choi (Goldman Sachs Group Inc/The)
Kaushik Rudra (Standard Chartered PLC)
Lai Yew (Oriented Media Group Bhd)
Lawrence Lai (Standard Chartered PLC)

To de-activate this alert, click here

UUID: 7947283