South Korean Bond Yields Rise From Record Lows as Oil Rallies

  • Yields stayed too low after BOK meeting: Daewoo Securities
  • Fed minutes support view U.S. rates to stay lower for longer

South Korean bonds fell for a second day, pushing yields up further from record lows, as a rally in oil damped demand for haven assets.

The yield on the government notes due December 2025 climbed two basis points to 1.81 percent at the close in Seoul, four basis points off a record low reached on Feb. 11, Korea Exchange prices show. The three-year yield rose two basis points to 1.45 percent after falling to an unprecedented 1.436 percent Tuesday. 

Brent crude advanced for a second day after Iran supported a pledge by Saudi Arabia and Russia to freeze production to boost prices, while minutes of the Federal Reserve’s latest meeting supported speculation the authority will keep U.S. interest rates lower for longer. The Bank of Korea held its benchmark rate on Tuesday and five of 24 analysts surveyed by Bloomberg are projecting a cut next month.

"Risk sentiment is improving globally, driven by higher oil prices," said Seil Lee, a fixed-income analyst at Daewoo Securities Co. in Seoul, who forecasts the central bank will reduce its policy rate to 1.25 percent in March. "There were views that the yields were staying near the record lows for a bit too long."

Foreign investors sold more bond futures than they bought, while becoming net buyers in Korean stocks on Thursday. The 10-year yield will reach 2.25 percent this quarter, according to the median forecast in a Bloomberg survey.

The won was little changed at 1,227.22 a dollar after gaining as much as 0.4 percent, according to data compiled by Bloomberg. The currency has lost 4.5 percent in three months, the most in Asia. 

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