Bond Market

Both the domestic and foreign bond markets were bullish in the month of December. In December, the economic figures in the U.S. and European countries and corporate financial reports were weaker than expected, signaling the continual slide of the global economy, the U.S. Congress rejected the auto industry bailout plan, and the U.S. FED cut the rate further by 0.75% on 12/16. Thus money swarmed more quickly into the treasury market. The yield of 10-year treasury notes closed at 2.19% on 12/17, off 77bp from the end of November. Domestically, as the economic forecast remained poor, the pressure of inflation apparently waned, the international bond markets turned strong, and the Central Bank unexpectedly lowered the rediscount rate by 0.75% that led the further reduction of interest rates, the yield of 10-year bonds skidded lower to close at 1.35% on 12/17, down 14bp from the end of November.

The 5-year, 10-year, and 20-year benchmark bond yield, and Taiwan government bond index was around 1.0259%, 1.3748%, 1.8522%, and 1016.66 points at the end of December. The daily turnover in the bond market averaged NT$341.17 billion for the month. The daily average of outright trade amounted to NT$98.69 billion (28.93%) and that of RP/RS trade was NT$242.48 billion (71.07%). The market turnover increased by 21.90% from November (the daily market turnover in the month of November averaged 321.86 billion; it amounted to NT$86.30 billion for outright trade and NT$235.56 billion for RP/RS trade).