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Central Bank Duel Spurs Korea Rate-Cut Bets After Japan Easing

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Fixed-income traders are stepping up bets that South Korea will cut interest rates to a record low to curb gains in the won versus the yen.

The difference in yield between South Korea’s three-month certificates of deposit and where forward contracts signal they will be in six months fell to minus 15 basis points yesterday, a threshold reached in the month leading up to to rate cuts in August and October, according to data compiled by Bloomberg. The benchmark three-year bond yield held at an all-time low today after the Bank of Japan said Oct. 31 it will increase its annual target for enlarging the monetary base.