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S.Korean bonds flat, seek post-ECB direction

Reuters - Friday, July 4

SEOUL, July 4 - South Korean government bond prices were unchanged in slow early trade on Friday after a volatile recent run, as investors sought more clarity on the market's direction after the European Central Bank's rate increase.

The ECB raised interest rates to a near 7-year high on Thursday, but dimmed the prospect of further moves, providing some relief to investors who had feared any hawkish comments from the ECB would pressure the Bank of Korea to raise rates soon.

By 0100 GMT, yields on both the 5- and 3-year treasury bonds <KSDA02> were quoted unchanged from their Thursday closing rates of 6.16 percent and 6.06 percent, respectively.

"The ECB event risk has now been cleared and the U.S. markets are closed today for a holiday, and so investors here are keeping a low profile while assessing the future direction," said Kong Dong-rak, a fixed-income analyst at Hana Daetoo Securities.

September treasury bond futures <KTBc1> were quoted unchanged at 104.76.

South Korean bond prices had fallen in all but one session this week on spreading worries accelerating oil-led inflation would prompt the country's central bank to raise interest rates soon for the first time since August last year.

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