Korea Bonds Snap Two-Day Decline as U.S. Data Miss Estimates

South Korea’s government bonds rose for the first time in three days as data showed manufacturing in New York slowed more than forecast, casting doubt on the strength of the U.S. economic recovery.

The Federal Reserve Bank of New York’s general economic index fell to 4.48 in February, compared with 12.51 in January, and the median estimate of 8.5 in a Bloomberg News survey, data showed yesterday. Positive readings mean that activity expanded. The Federal Reserve will release minutes from its Jan. 28-29 meeting today, giving details on its decision to trim bond purchases by $10 billion for the second time. South Korea’s short-term external debt rose to $112.8 billion as of end-December, the central bank reported today.

“Market participants have so far stayed positive on risk assets, attributing poor U.S. data to cold weather, but consistent weakness will make investors doubt the strength of the economic recovery,” said Park Dongjin, a fixed-income analyst at Samsung Futures Inc. in Seoul.

The yield on the 3.25 percent notes due September 2018 fell two basis points, or 0.02 percentage point, to 3.14 percent at the close in Seoul, according to Korea Exchange Inc. prices. Ten-year sovereign yields declined three basis points to 3.49 percent.

Goldman Sachs Group Inc. recommends staying long on the greenback against the Korean currency, targeting 1,100 won per dollar, analyst Fiona Lake in London wrote in a report yesterday. The won’s strength against the Japanese yen is likely to pose headwinds for exports, she wrote. The Korean currency appreciated 9.7 percent against the yen in the past six months, according to data compiled by Bloomberg.

The won closed little changed at 1,065.65 per dollar, according to data compiled by Bloomberg. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, rose two basis points to 7.04 percent.

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