South Korea’s Bonds Gain as Draghi Comments Support Global Debt

South Korea’s government bonds rose as signals that European Central Bank officials are ready to add monetary stimulus fueled demand for global debt.

The yield on 10-year U.S. Treasury notes fell the most in more than a week yesterday while Germany’s two-year yield touched the lowest level since December 2012 after ECB President Mario Draghi said Aug. 22 that bets on inflation in the euro area have “exhibited significant declines” and policy makers will use “all available instruments needed” to ensure price stability. The Kospi index of shares rose for a third day as global funds bought local equities.

“We’re seeing South Korea’s bonds and equities gain on expectations of an increase in liquidity spurred by the ECB’s actions,” said Kim Young Jung, a Seoul-based fixed-income analyst at Woori Futures Inc. “Investors are also adding to bonds after a recent correction made yields attractive.”

The yield on the 3.5 percent notes due March 2024 fell for a second day, declining four basis points, or 0.04 percentage point, to 3.07 percent as of the 3 p.m. close in Seoul, Korea Exchange Inc. prices show. That’s the lowest level in more than a week. The yield rose eight basis points last week.

South Korean Finance Minister Choi Kyung Hwan urged lawmakers at a press briefing today to pass economy-related bills to keep the growth momentum.

The won appreciated 0.3 percent to 1,016.88 per dollar, according to data compiled by Bloomberg. One-month implied volatility, a gauge of expected swings in the exchange rate used to price options, fell 15 basis points to 5.95 percent.

The currency strengthened 0.1 percent against the Japanese yen to 9.79 as of 4:59 p.m. in Seoul, close to the six-year high of 9.74 reached yesterday. The won’s appreciation against the yen will prompt concern about possible government intervention to stem gains, Hong Seok Chan, a Seoul-based currency strategist at Daishin Economic Research Institute, wrote in a report today.

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