GreTai NewsLetter 12

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Bond Market

BThe foreign bond markets had a bull run that subsequently turned bearish in the month of June. Domestically, the bond market fluctuated in negative territory for the month. In the beginning of the month, driven by the sharp decline of global stock markets and commodity prices, the yield of 10-year US treasury notes slid as much as 15bp at one time. But the situation turned around as the subsequently published core CPI index showed accelerated growth and aroused market concern over continuing FED rate hike under the pressure of inflation. The yield of 10-year treasury notes closed at 5.15% on 6/21, up 3bp from the end of May. Domestically, despite of the positive factors of rising foreign bond markets and the slump of domestic stock markets, the yield of 10-year bond did not pick up as the Central Bank continued the issue of long-term NCD to absorb funds and the interest rates of additional issues of 10-year bond were high than market expectation. Subsequently under the expectation of another rate hike from the Central Bank when it announced a board meeting scheduled for 6/29, the market sentiment turned bearish again. The yield of 10-year bond closed around 2.18% on 6/21, up 3bp from the end of May. Taiwan government bond index closed at 989.37 points at the end of June, falling 1.46 points from the month before.

The 5-year, 10-year, and 20-year benchmark bond yield, and Taiwan government bond index was around 1.9984%, 2.1409%, 2.2756% and 990.84 points at the end of June. The daily turnover in the bond market averaged NT$617.6 billion for the month. The daily average of outright trade amounted to NT$283.8 billion (45.95%) and that of RP/RS trade was NT$333.8 billion (54.05%). The market turnover increased by 6.54% from May (the daily market turnover in May averaged NT$579.7 billion; it amounted to NT$223.5 billion for outright trade and NT$356.2 billion for RP/RS trade).