Korea Bonds Fall on U.S. Jobs Data; Won Drops From 11-Month High

Oct. 8 (Bloomberg) -- South Korea’s government bonds fell as an unexpected drop in U.S. unemployment brightened the outlook for exports. The won weakened from an 11-month high.

The jobless rate in the world’s biggest economy dropped to 7.8 percent in September, the lowest since January 2009, data showed Oct. 5. The Bank of Korea will probably cut its benchmark interest rate by a quarter of a percentage point to 2.75 percent at an Oct. 11 policy meeting, according to 13 out of 16 economists surveyed by Bloomberg.

“The bonds started the day weak on external events including U.S. jobs data, but with market players looking forward to a rate cut by the BOK this week, losses were limited,” said Huh Kwan, a Seoul-based fixed-income trader at Korea Investment & Securities Co.

The yield on the 2.75 percent notes due September 2017 climbed one basis point, or 0.01 percentage point, to a one-week high of 2.83 percent at the close in Seoul, Korea Exchange Inc. prices show. The one-year interest-rate swap was little changed at 2.81 percent.

The won slipped 0.1 percent to 1,112.05 per dollar, according to data compiled by Bloomberg. The currency touched 1,109.57 earlier, the strongest level since Nov. 1, 2011. One-month implied volatility, a measure of exchange-rate swings used to price options, rose 13 basis points to 6.15 percent.

South Korea’s exports declined for a third month in September and the government estimated that the U.S. accounted for some 11 percent of shipments in the Sept. 1-Sept. 20 period.

The nation’s unemployment rate probably increased to 3.2 percent last month from 3.1 percent in July and August, according to the median forecast of economists surveyed before official data due Oct. 10.

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

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