Taiwan auctioned 10-year treasury bonds at a yield of 1.63 percent, the central bank said on Monday, which was lower than expectations as a result of active demand from banks and insurers that were flush with liquidity. Bond dealers said they expected no major changes in Taiwan's central bank monetary policy as the economy was still hovering at the bottom, which meant it would likely hold its benchmark discount rate at a record low of 1.25 percent later in June.
They added that the latest auction would likely put some pressure on the yields of Taiwan's benchmark 10-year bonds in the secondary market, which ended 1.1 basis points down at 1.6335 before the auction result was announced. "We saw banks and insurance firms buying up the bonds during this auction as the amount of bonds issued won't increase by a huge amount this year," said Baker Tu, manager at Capital Securities.
Taiwan's yield curve has been steepening this year after a wave of cuts that brought the island's interest rates to a record low prompted investors to buy up bonds with shorter maturities. In the secondary market, the yield differential between five and 20-year bonds widened to 128 basis points from 76 basis points at the beginning of this year. However, dealers said there was little room for the curve to steepen further as interest rates would be kept unchanged for most of this year.