Korea Bonds Fall as Investors Assess BOK Outlook After Rate HeldMoonyoung Tae
South Korea’s government bonds fell as investors assessed whether monetary policy will be eased further after the central bank joined regional counterparts in refraining from cutting benchmark interest rates.
The three-year yield rose earlier to match the Bank of Korea’s seven-day repurchase rate, which was held at a record low of 1.75 percent on April 9, following similar decisions in Australia and India. Governor Lee Ju Yeol said that day the previous rate cut in march will help the economy in the second half. The Monetary Authority of Singapore kept its policy unchanged Tuesday after economic growth last quarter beat estimates. The next BOK review is on May 15.
The yield on the 3 percent bonds due September 2024 climbed two basis points, or 0.02 percentage point, to 2.12 percent as of the 3 p.m. close in Seoul, Korea Exchange prices show. The yield on the 2 percent notes due December 2017 was steady at 1.74 percent after reaching 1.75 percent earlier.
“The next BOK meeting is still some time away, so it’s unfeasible to push yields lower on the prospect of another rate cut,” said Seo Hyang Mi, a Seoul-based fixed-income strategist at HI Investment & Securities Co. “The market is waiting to see more economic data, and Singapore’s policy decision could weaken expectations for further easing in South Korea.”
South Korea’s economic growth in the fourth quarter of last year was the slowest since 2009. Data for the first three months of 2015 are due April 23.
The won rose as the Singapore dollar advanced after the city-state’s central bank, which uses the currency to guide the economy, said its policy stance was appropriate. The MAS said it will “maintain the policy of a modest and gradual appreciation” of its dollar, as the economy expanded an annualized 1.1 percent in the three months through March from the previous quarter, higher than the 0.2 percent median estimate in a Bloomberg survey.
The won rose 0.4 percent to 1,094.13 a dollar, snapping a five-day decline, data compiled by Bloomberg show.