South Korea’s government bond yields fell to record lows as economists forecast the central bank will reduce interest rates tomorrow for a second time this year to spur growth. The won retreated from an 11-month high.
The nation faces bigger external risks from Europe’s debt crisis and a slowdown in emerging economies, the Bank of Korea said yesterday in a report prepared for a parliamentary audit. Thirteen of 16 economists surveyed by Bloomberg News predict the central bank will cut its benchmark seven-day repurchase rate by a quarter of a percentage point to 2.75 percent, having last reduced borrowing costs in July. The rest forecast no change.
“Investors are now accepting a rate cut as a certainty,” said Huh Kwan, a Seoul-based fixed-income trader at Korea Investment & Securities Co. “The central bank’s comments on the economy have spurred this speculation.”
The yield on the government’s 3.25 percent bonds due June 2015 fell five basis points, or 0.05 percentage point, to close at 2.72 percent in Seoul, Korea Exchange Inc. prices show. That’s the lowest for a benchmark three-year note since Bloomberg started compiling the data in 2000. Ten-year yields dropped five basis points to 2.91 percent, also an all-time low. The one-year interest-rate swap declined four basis points to 2.76 percent.
South Korea’s jobless rate held at this year’s low of 3.1 percent for a third month in September, official data showed today. The Reserve Bank of Australia reduced its benchmark rate last week to the lowest level since 2009.
‘Mobilizing All Means’
Central bank Governor Kim Choong Soo told lawmakers yesterday that global policy coordination in borrowing costs means adjusting rates toward levels in other countries, according to a report by Yonhap Infomax.
Finance Minister Bahk Jae Wan said in a Bloomberg News interview yesterday that “mobilizing all available fiscal, monetary and financial policy means in a bold move with a large size may have harmful effects.”
The won weakened 0.4 percent to 1,114.70 per dollar, according to data compiled by Bloomberg. The currency touched 1,109.57 on Oct.8, the strongest level since Nov. 1, 2011. One- month implied volatility, a measure of exchange-rate swings used to price options, fell two basis points, or 0.02 percentage point, to 6.46 percent.
To contact the reporter on this story: Jiyeun Lee in Seoul at email@example.com