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Korean Bonds Advance Before Interest-Rate Meeting; Won Rises

Jan. 10 (Bloomberg) -- South Korea’s five-year bonds rose, pushing their yield to a two-month low, before the central bank meets to review interest rates tomorrow.

The Bank of Korea will leave its seven-day repurchase rate at 2.75 percent, according to all but one of 14 analysts surveyed by Bloomberg. One forecast a 25 basis point reduction, after similar moves at reviews in July and October. The won, the best performer of the past year among 16 major currencies tracked by Bloomberg, advanced.

“The central bank will probably need to cut interest rates at some point, if not tomorrow, to help the economy and also to help slow the won’s appreciation,” said Hong Jung Hye, fixed-income analyst at Shinyoung Securities Co. in Seoul. “Still, investors are generally cautious before the central bank rate decision is announced.”

The yield on the 2.75 percent bonds due September 2017 slipped four basis points, or 0.04 percentage point, to 2.83 percent at the close in Seoul, according to Korea Exchange prices. That’s the lowest level since Nov. 8. So far this year, the yield has dropped 14 basis points.

The won rose 0.1 percent to 1,060.32 against the dollar, according to data compiled by Bloomberg. It strengthened 8.9 percent in the past 12 months and touched 1,059.97 today, the strongest level since Aug. 4, 2011.

Finance Minister Bahk Jae Wan said last week he was concerned about herd behavior in the foreign-exchange market and may introduce measures to curb won volatility.

To contact the reporter on this story: Seyoon Kim in Seoul at skim7@bloomberg.net

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

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