Korea’s Three-Year Yield Near Record Low After Treasuries Rally

Updated on

The yield on South Korea’s three-year government bonds was near a record low as a slump in oil prices boosted demand for relatively safer assets.

Global sovereign notes have rallied, with the benchmark 10-year U.S. Treasury yield slipping below 2 percent yesterday for the first time since October, as the drop in crude damped the outlook for the world economy. Overseas investors sold more South Korean equities than they bought today, set for the first outflow in a week, exchange data show.

“Global conditions such as falling oil prices and Greece’s possible exit from the euro zone are prompting anxiety among investors,” said Yoon Yeo Sam, a Seoul-based fixed-income analyst at Daewoo Securities Co. “This puts downward pressure on major government bond yields.”

The yield on notes due December 2017 was little changed at 2.08 percent, Korea Exchange prices show, matching a record low reached Nov. 28. The 10-year yield fell as much as two basis points, or 0.02 percentage point, to an unprecedented 2.53 percent before closing one basis point higher at 2.56. It tracked similar-maturity Treasuries, the yield on which rose to 1.96 percent after yesterday’s nine-basis point drop to 1.94 percent.

The average yield among benchmark securities issued by the U.S., Japan and Europe -- known as the Group of Three -- dropped to 0.89 percent yesterday, the least ever based on Bloomberg data going back to 1989. Ten-year yields declined to records today in Australia and Japan. Germany’s five-year yield extended its push to negative levels. Treasuries halted a seven-day rally today.

Won Declines

The won fell 0.1 percent to 1,099.88 a dollar, according to prices compiled by Bloomberg. The currency, which lost 7.3 percent over the last two quarters, touched 1,111.70 on Jan 5, the weakest since Dec. 9. The yen declined 0.6 percent to 119.05 as of 3:51 p.m in Tokyo, after climbing 1.1 percent yesterday.

“The won continues to follow yen,” said Dong-Wook Kim, a Seoul-based currency trader at Kookmin Bank. The currencies of Japan and South Korea tend to move in tandem as the countries compete for exports in international markets.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE