South Korea Three-Year Bond Yield Retreats From Five-Month High

South Korea’s three-year bond yield retreated from a five-month high and the won was steady as investors waited for clues on when the U.S. will start to trim stimulus that has inflated emerging-market asset prices.

U.S. employers hired 181,000 workers in November after adding 204,000 the previous month, according to a Bloomberg News survey before official data due Dec. 6. Federal Reserve officials have said they may reduce the $85 billion in monthly bond purchases “in coming months” as the economy improves, according to minutes of their October meeting. Overseas investors were net buyers of three-year debt futures for a second day after a 24-day run of net sales, exchange data show.

The yield on the 3 percent sovereign bonds due December 2016 fell one basis point, or 0.01 percentage point, to 3.02 percent as of 10:58 a.m. in Seoul, according to Korea Exchange Inc. prices. The benchmark three-year yield touched 3.04 percent yesterday and on Dec. 2, the highest in five months.

“Investors are in a wait-and-see mode before the U.S. jobs data and foreign buyers of bond futures slightly support the bonds,” said Kim Young Jung, a fixed-income analyst at Woori Futures Co. in Seoul. “The U.S. economy is showing signs of recovery and, assuming the Fed tapering starts in March, the three-year yield is expected to rise to as much as 3.15 percent in the first half.”

Pinebridge Investments has reduced its holdings of South Korean government debt as shrinking risk premiums spur profit-taking, Arthur Lau, head of fixed income in Hong Kong, said in an e-mail interview on Nov. 26.

South Korea’s foreign reserves rose by $1.78 billion in November to a record $345 billion, Bank of Korea said in an e-mailed statement today.

The won was little changed at 1,061.25 per dollar, data compiled by Bloomberg show. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, rose four basis points to 5.65 percent.

To contact the reporter on this story: Yewon Kang in Seoul at ykang51@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net

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