A potentially calamitous fall in the value of structured bonds in Taiwan could be solved through CBO issuance, say Asian ABS bankers. The question is whether regulators will give full backing to a surge of issuance that could reach between NT$160 billion and NT$800 billion ($4.75 billion and $23.7 billion) over the next year.

The crux of the situation that between early 2000 and late last year, Taiwan operated in a declining interest rate environment. Consequently, bond funds - which account for 70% of investments - spent heavily on products such as inverse floaters and range accruals, which offered greater returns than bank deposits.

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