Financial Times: Taiwan's bond frogs had an average Rekt of 11-12% in May! The US bond ETF market is too singular.

The recent strong appreciation of the Taiwan dollar has caused a large number of Taiwanese investors who hold USD-denominated US Treasury ETFs to face double losses from falling exchange rates and bonds. Highlights Taiwan's unique ETF market structure. (Summary: U.S. stock bitcoin profit "remittance to Taiwan deduction of 5%"!) Trump plans to introduce a new bill: transfer tax for non-US citizens) (Background supplement: U.S. debt lost 3A credit review) Many Taiwan U.S. bond ETFs "hit new lows" debt frogs are bleeding, what is the impact of the future market? The recent sharp appreciation of the Taiwan dollar against the U.S. dollar has hit Taiwanese investors who have previously flooded into U.S. Treasury ETFs. Investors not only suffered losses from the fall in the price of bonds themselves, but also suffered double-sided beatings due to exchange rate changes that eroded returns. According to Zhang Shengyuan, vice president of fixed income department of China Trust, after accounting for the loss of nominal bonds and the exchange loss caused by the appreciation of the Taiwan dollar, the average loss of Taiwanese investors by May 2025 is about 11-12%. Take the largest Yuanta US government bond ETF with a maturity of more than 20 years, for example, its value has lost 13% since the beginning of April, mainly due to exchange rate changes; From the Fed's rate hike cycle, the fund has lost nearly a third since its inception in early 2017. This wave of decline is in sharp contrast to the background of the previous US "Economist" semi-annual Big Mack Index showing that the Taiwan dollar is undervalued by 58.8%, and investors are expected to invest heavily in overseas assets. Huge ETF market and "treasure island bond ETF" become a driver According to the Financial Times, Taiwan's unique financial ecology is a key factor in amplifying the impact. Taiwan has the world's largest ETF industry, with assets of US$196 billion by the end of 2024, accounting for 66% of the total assets of the overall investment fund, equivalent to a per capita investment of nearly US$8,400, of which bond ETFs account for a huge proportion. In order to circumvent restrictions on foreign issuers issuing US dollar bonds (i.e. "Baodao bonds") in Taiwan, Taiwanese investors have developed the "Baodao Bond ETF". These Taiwan-listed ETFs that invest in U.S. dollar bonds have circumvented holding restrictions because they are considered local stocks, attracting retail investors ranging from institutional entities to higher U.S. dollar rates. Data show that from 2019 to January 2025, Taiwanese investors injected US$73 billion into US bond ETFs (data source: Morningstar), mainly concentrated in government bonds with a maturity of more than 20 years and long-term corporate bonds. As of the end of March this year, Taiwan's overall fixed income ETF industry (including domestic investment) was worth $94 billion (source: Morningstar). Exchange rate and interest rate double kill This round of losses comes from the decline in bond prices caused by the US Federal Reserve's interest rate hike, and the exchange loss caused by the strong rise of the Taiwan dollar. Blackstone Strategy Analysis and Morningstar pointed out that the recent strengthening of the Taiwan dollar may be a harbinger of broader changes in the global currency market. Geopolitical tensions and U.S. trade policy have also exacerbated the volatility of the Taiwan dollar. At the same time, the reduction of foreign central banks and sovereign wealth funds in US bond investment may also increase the volatility of the US bond market. There are already signs that Taiwanese investors are selling U.S. fixed-income assets. According to Morningstar's analysis, the combined outflow in February and March 2025 was approximately $1.1 billion. While the April data was incomplete, covering only one-eighth of Taiwan's bond ETFs, net outflows had reached $1.1 billion, suggesting that the withdrawal was accelerating ahead of the sharp swings in the Taiwan dollar in May. The large fluctuation of US bonds caused investors to lose a lot of money in a short period of time, highlighting the single risk of Taiwan's retail investment culture. Related reports Huida Taiwan opens nearly 100 job vacancies, NVIDIA headquarters Huang Jenxun sells off: "There is no surprise if it breaks the terrier too early" "Taiwan's large virtual asset exchange TWEX" 5/22 officially launched, Taiwan's big brother and Fusheng Digital enter cryptocurrency 〈Financial Times: Taiwan Debt Frog has an average blood loss of 11-12% in May! The U.S. Treasury ETF market atmosphere is too single" This article was first published in BlockTempo's "Dynamic Trend - The Most Influential Blockchain News Media".