The island’s exports contracted for a sixth month in July, according to data issued after the markets closed on Friday, a week after preliminary figures showed second-quarter growth was the weakest in three years.
ABN Amro Group NV said monetary easing is becoming more likely this year, while DBS Group Holdings Ltd. forecasts a rate reduction may come as soon as the next meeting in September if the economy keeps slowing.
Taiwan hasn’t adjusted benchmark borrowing costs since June 2011. “The banking system has turned to refuge assets as the weaker outlook has lowered returns on loans,” said Jeffrey Huang, a fixed-income trader at KGI Securities Co. in Taipei.
While the central bank probably won’t ease policy in September, it may comment on slower growth in its statement, which will boost speculation of a rate cut by year-end, he said.
The yield on the sovereign notes due 2025 dropped two basis points to 1.369 percent as of 11:46 a.m. local time, Taipei Exchange prices show.
That’s the lowest for benchmark 10-year securities since June 2013. The five-year yield declined one basis point to 0.906 percent, also a two-year low.
The gap between 10- and five-year yields narrowed to 46 basis points, the least since March. There is more room for the 2025 bond yield to fall further as the five-year yield is already near its 2013 low of 0.86 percent, Huang said.
Exports fell 11.9 percent last month from a year earlier, more than the median estimate in a Bloomberg survey for a 10.5 percent drop.
The government will announce the final second-quarter growth figure on Friday. Taiwan’s dollar rose 0.4 percent to NT$31.647 against its U.S. counterpart on Monday, according to Taipei Forex Inc.
bloomberg.com
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