Korean Bond Yields Drop to Records on Park’s Rate-Cut CommentsMoonyoung Tae
South Korea’s bonds rallied, pushing yields to record lows, as President Park Geun Hye said the government will discuss interest rates with relevant authorities as it seeks to revive the economy.
Park, responding to a question at a press conference today on whether the Bank of Korea should cut borrowing costs, said the benchmark rate will be discussed with “macro-economic policy organizations” to ensure a timely response. Three out of 15 economists surveyed by Bloomberg predict the monetary authority will lower the rate to 1.75 percent from a record 2 percent at a review this week, while 12 forecast no change.
The yield on government bonds due December 2017 fell as much as eight basis points, or 0.08 percentage point, to 1.98 percent in Seoul, an all-time low for a benchmark three-year note. It was 2.01 percent as of the close in Seoul, Korea Exchange prices show. The five- and 10-year yields sank as low as 2.13 percent and 2.45 percent, respectively.
“The bond market reacted to the President’s comments on interest rates,” said Park Dongjin, a Seoul-based fixed-income analyst at Samsung Futures Inc. “Interest in today’s comments was very high as there are not many factors to move the market at the moment.”
President Park said the government doesn’t decide on interest rates and her comments today on the subject mean she would encourage an appropriate response from the relevant organizations, Yonhap Infomax reported, citing the leader. She said at today’s press briefing that reviving the economy is an urgent task and 3.8 percent growth is achievable this year.
Gross domestic product increased 3.2 percent from a year earlier in the third quarter of 2014, the smallest gain since mid-2013. Expansion probably held at that pace in the last quarter and is forecast to be 3.1 percent in the three months through March, based on the median estimates of economists surveyed by Bloomberg.
The won strengthened to a two-month high after U.S. jobs data suggested the labor market recovery in the world’s biggest economy is too weak for the Federal Reserve to start raising interest rates, which pushed down the dollar from near multi-year highs versus the yen and euro.
South Korea’s currency advanced 0.8 percent to 1,081.49 a dollar in Seoul, prices compiled by Bloomberg show. The currency rose for a third day and touched 1,080.60, the highest since Nov. 5. It climbed 0.6 percent versus the yen to 9.14.