South Korean Bonds Advance on Speculation Europe to Ease Policy

South Korea’s government notes advanced, sending the 10-year yield to the lowest level in more than six months, as bets Europe will ease monetary policy drove global bonds higher.

The European Central Bank is preparing multiple measures against low inflation, Executive Board member Yves Mersch said yesterday. The U.S. 10-year yield touched 2.52 percent yesterday, the least since Oct. 31, while German and French rates fell to the lowest in 12 months. South Korean authorities may have bought more than $1 billion on the currency market yesterday to prevent the won from strengthening beyond 1,020 against the greenback, the Korea Economic Daily reported.

“South Korean bonds are moving in line with global debt, which were supported by the ECB easing speculation,” said Kim Min Gyu, a Seoul-based fixed-income strategist at Kiwoon Securities Co.

The yield on the 3.5 percent South Korean sovereign notes due March 2024 declined six basis points to 3.39 percent as of 10:13 a.m. in Seoul, the lowest for a benchmark security since Oct. 31, according to Korea Exchange prices. The yield on the 3.125 percent bonds maturing in March 2019 fell four basis points, or 0.04 percentage point, to 3.07 percent.

The Bank of Korea is ready to act against herd behavior in the currency market, Lee Seung Heon, head of the monetary authority’s foreign-exchange market team, said in Seoul yesterday.

The won advanced 0.1 percent to 1,026.85 per dollar, according to data compiled by Bloomberg. It touched 1,028.40 yesterday, the weakest since May 6.

“Investors will stay cautious to see whether the authorities take further action,” said Ryoo Hyun Jung, chief currency dealer at Citibank Korea Inc.

To contact the reporter on this story: Jiyeun Lee in Seoul at jlee1029@bloomberg.net

To contact the editors responsible for this story: James Regan at jregan19@bloomberg.net Robin Ganguly, Amit Prakash

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.