Bond Market

Both the foreign and domestic bond markets went bullish in the month of January. Despite of the fact that published economic figures, such as factory orders and ISM manufacturing index indicated growth, the persistently high unemployment rate and low inflation figure caused bond yields to drop. The yield on 10-year treasury note closed at 3.58% on 1/29, down 26 bps from the end of the previous month. Domestically, the bond yield dropped in the beginning of the month under strong demands in the when-issued trading of 30-year bonds. As concern over over-supply of long-term bonds evaporated, there was pressure to absorb idle funds on the market and advantage on the chip side, the bond yield declined gradually. The yields on 10-year bond closed at 1.47% on 1/29, down 7bps from the end of December.

The 5-year, 10-year, and 20-year benchmark bond yield, and Taiwan government bond index closed around 0.88%, 1.47%, 1.93%, and 1003.34 points at the end of January. The daily turnover in the bond market averaged NT$264 billion for the month of January. The daily average of outright trade amounted to NT$119.1 billion (45%) and that of RP/RS trade was NT$144.9 billion (55%). The market turnover increased by 35% from December (the daily market turnover in the month of December averaged NT$195.7 billion; it amounted to NT$50.7 billion for outright trade and NT$145 billion for RP/RS trade)