Bond Market

The foreign bond market went bearish, while the domestic market fluctuated in a narrow range in the month of February. In the beginning of the month as published economic figures, such as factory orders and ISM manufacturing index indicated growth and inflation related sub-indicators rose substantially, bond yield went higher. During the Chinese New Year, the FED’s unanticipated raise of discount rate drove the bond yield higher further. The yield on 10-year treasury note closed at 3.68% on 2/23, up 10bps from the end of the previous month. Domestically, The Southern Europe debt crisis that led to the tumbling of stock markets helped little to boost the bond market. The trading was also light during the long Chinese New Year holiday. The overall market fluctuated in a narrow range throughout the month. The yield on 10-year bond closed at 1.41% on 2/26, down 6bps from the end of January.

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 February. The daily turnover in the bond market averaged NT$232.3 billion for the month of February. The daily average of outright trade amounted to NT$59.9 billion (26%) and that of RP/RS trade was NT$172.4 billion (74%). The market turnover decreased by 24% from January (the daily market turnover in the month of January averaged NT$305.5 billion; it amounted to NT$119.1 billion for outright trade and NT$186.4 billion for RP/RS trade).