Taiwan launches government bond futures market

Taiwan has launched its government bond futures (GBF) market with the listing of 10-year government bond futures on the Taiwan Futures Exchange (Taifex) and the opening of the Bond Lending Centre of GreTai Securities Market, a non-profit organisation.

By listing the Taiwan Futures Exchange 10-year government bond futures (Taifex GBF) and bond lending system, the country hopes to further assist strategic trading in the bond market by offering market participants a hedging tool. The Bond Lending Center will also be open to the general public, and is designed to ensure that all futures traders have a ready supply of bonds for settlement.

“Moreover, the launching of the Taifex GBF will help relieve the hesitation of conservative foreign institutional investors to invest in our bond market due to the lack of hedging function. It is expected to draw international attention to Taiwan’s market and attract more foreign funds into our market,” said the exchange.

As part of efforts to develop a fully fledged bond market, the Taiwan government implemented a series of programmes, including setting up a regular issuance schedule.

By the end of last year, the average daily trading value had reached NT$540 billion ($15.9 billion), up more than 50% from the previous year, according to the exchange. "The debut of the Taifex GBF and the Bond Lending Center will help lower the costs of investment, making the bond market more appealing to individual investors as well," the exchange said.

The launch of the government bond futures contracts also signifies the evolution of the country’s futures market from its stock-based product line, which included five futures and two options traded at Taifex.