Friday, September 22, 2017

Taiwan insurers urged to buy long-term debt

The Taiwan Financial Supervisory Commission’s (FSC) has suggested to local insurers that they invest in long-term government bonds, in the light of ongoing sluggish demand for debt which undermines the state’s spending objectives.

People who are familiar with the recommendation, according to a Reuters report, said that the regulator’s call comes at a time that Taiwan’s bond sales are struggling due to a global bonds slump largely attributed to the election of Republican candidate Donald Trump last week in the US.

Since Trump’s win, markets have gravitated to the view that his administration will usher in expansionary fiscal policies, sending US Treasury yields spiking and prompting a scramble in global markets to hedge against rising inflation expectations.

Two of the people who have seen FSC’s letter to insurers said that based on the correspondence, demand for 30-year bonds from local insurers has dipped this year.

In turn, this has made it hard for the government to meet its financing goals and bankroll infrastructure projects.

The sources said that the FSC’s request to insurers was subject to their capital allocation. Next week, the state will hold a 30-year bond auction. Yields of the bond prior to the auction rose to 1.915% recently.

 

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