South Korean Bonds Advance as Obama Steps Up Russia Criticism

South Korean government bonds gained as the U.S. condemned Russia’s annexation of Crimea, prompting investors to seek safer assets.

The U.S. and Europe are at “a moment of testing,” as Russia challenges the ideals of democracy, free markets and international law that have spread peace, President Barack Obama said yesterday. Demand for durable goods in the U.S. rose more than forecast while factories received fewer orders for machinery, communications gear and computers last month, figures showed yesterday. South Korea’s industrial output shrank 0.3 percent in February from the previous month, according to a Bloomberg survey before data due tomorrow.

The yield on the 3.125 percent sovereign notes due March 2019 fell two basis points, or 0.02 percentage point, to 3.16 percent at the close in Seoul, Korea Exchange data show. Three-year bond futures for June delivery rose 0.01 to 105.70.

“We’re seeing increased demand for safety assets after Obama’s comments raised concern about more sanctions against Russia and as U.S. data were mixed,” said Park Dongjin, a Seoul-based fixed-income analyst at Samsung Futures Inc. “Still, gains in bond futures will be limited as investors think they will trade within range for some time.”

The won gained as exporters sold the dollar near the month-end. The currency strengthened 0.3 percent to 1,071.44 per dollar, according to data compiled by Bloomberg. It touched 1,071.00 earlier, the strongest level since March 19. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, fell 21 basis points to 6.94 percent.

“We may see more local exporters selling the U.S. currency tomorrow, and the dollar-won exchange rate may test the 1,070 level,” said Jude Noh, a Seoul-based currency trader at Suhyup Bank.

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