TAIWAN: CBC Later, Little Priced For Outlook, SocGen Sees Modest Easing In 2026
The Taiwan central bank (CBC) is seen firmly on hold today. As we noted earlier - growth for the first half of 2025 was strong, as AI demand for Taiwan's chips drove expansion. This buys the CBC time to assess the economic fallout from higher tariff levels and potentially weaker external demand. The chart below plots the Taiwan monitoring indicator (which is the white line on the chart), against y/y GDP growth. The monitoring indicator is pointing to some slowing in growth, but from elevated levels.
- French Bank SocGen notes: "The better-than expected 1H growth should prompt the CBC to revise up the 2025 GDP forecast and to hold at next week’s meeting. It will likely highlight heightened uncertainty regarding the outlook as chip tariffs are yet to be announced by the US. But we think the CBC may also not drop hints of future rate cuts yet given near-term export resilience and the coming cash handouts. Recently, there has also been some credit easing on housing. As things stand, we expect the CBC to only cut in 2Q26 when the tariff impact on the non-tech sectors become more visible, but it will be a shallow easing cycle."
- Market pricing per the MIPR function on BBG shows very little priced in in terms of the outlook, with the 1yr ahead rate around 1.90%, versus the current policy rate of 2.00%.
- The 1y1y NDIRS swap sits at 1.57%, but in the first half of the year we got to the low 1.30% region, arguably when trade conflict fears were at their most elevated levels.
Fig 1: Taiwan Monitoring Indicator & GDP Y/Y
Source: Bloomberg Finance L.P./MNI
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JGBS AUCTION: 20Y Supply Faces A Yield & A Curve Near Cyclical Highs
The Japanese Ministry of Finance (MoF) will today sell Y800bn of 20-Year JGBs. The MoF last sold 20-year debt on 10 July 2025.
- Today’s 20-year JGB auction offers an outright yield near its cycle high, 10bps above last month’s level.
- Moreover, the 10/20 yield curve remains near its recent high, its steepest since 1999.
- The 20-year JGB is at a similar valuation to last month in terms of the 10/20/30 butterfly.
- On the other hand, the auction comes amid a slight improvement in sentiment toward long-term global bonds.
- Given these dynamics, it remains to be seen whether today’s supply can generate some positive momentum for JGB auctions or if market caution will weigh on demand.
- Results are due at 0435 GMT / 1235 JT.
JGBS AUCTION: Poll: 20-Year JGB Auction
*JAPAN 20Y GOVT BOND AUCTION MAY HAVE 98.85 LOWEST PRICE:POLL – BLOOMBERG
JGBS AUCTION: PREVIEW - 20-Year JGB Auction Due
The Japanese Ministry of Finance (MoF) will today sell Y800bn of 20-Year JGBs. The MoF last sold 20-year debt on 10 July 2025, the auction drew cover of 3.1462x at an average yield of 2.482%, an average price of 100.23, a high yield of 2.496%, a low price of 100.05, with 20.3084% of bids allotted at the high yield.
- Last month’s 20-year JGB auction showed mixed results across key metrics. The low price underperformed dealer forecasts, which were set at 100.10 according to a Bloomberg poll. However, the cover ratio increased to 3.1462x from 3.1070x in the previous auction and the auction tail shortened to 0.18 from 0.28.
- Today’s auction also comes on the heels of mixed demand metrics observed in this month’s 30-year JGB auctions. The low price aligned with dealer expectations of 95.35, per the Bloomberg survey. However, the cover ratio dipped to 3.4297x from 3.5796x. On the other hand, the auction tail shortened significantly to 0.15 from 0.31, indicating an improvement in bidding strength.
- Results are due at 0435 BST / 1235 JT.
