Taiwan’s bonds surged this month, pushing five-year yields down the most since 2009, while the local currency fell as signs the U.S. recovery is losing steam dimmed the outlook for exports and deterred risk-taking. The Taiex index of shares lost 10.4 percent this month, the biggest loss since October 2008, and the Taiwan dollar weakened the most since February. Global funds sold $6.6 billion more of the island’s shares than they bought since July, bringing net sales for 2011 to $7.7 billion, exchange data show. “The worrying data coming out from the U.S. supported bonds today,” said Artie Yao, a fixed-income trader at First Securities Inc. in Taipei. “The drop in yields this month reflects traders are less and less expecting a rate hike.” The yield on the 2 percent notes due July 2016 fell 19 basis points, or 0.19 percentage point, this month to 1.016 percent as of the 1:30 p.m. local close, prices from Gretai Securities Market show. That was the biggest decline for a benchmark five-year note since January 2009. Taiwan’s dollar traded at NT$29.020 versus the greenback, 0.4 percent weaker than at the end of July and little changed today, according to Taipei Forex Inc. The overnight money-market rate, which measures interbank funding availability, was little changed this month and today at 0.394 percent, according to a weighted average compiled by the Taiwan Interbank Money Center. The government cut its 2011 economic growth forecast this month to 4.81 percent from 5.01 percent, after reporting second- quarter expansion of 5.02 percent that was the slowest since 2009. The central bank last boosted its benchmark interest rate on June 30 by 12.5 basis points to 1.875 percent. The policy board is set to meet again in late September. To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net

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