Bloomberg News

Korea Bonds Advance on European Summit Outlook; Won Gains

June 27, 2012

South Korea’s government bonds gained as investors doubted whether Europe’s leaders will make progress at a summit on the region’s debt crisis this week. The won strengthened.

German Chancellor Angela Merkel told lawmakers yesterday that she “doesn’t see” shared debt happening in the euro area, according to Steffen Seibert, her chief spokesman. South Korean manufacturers’ confidence for July fell to four-month low, official figures showed today. The Kospi Index (KOSPI) closed little changed as overseas funds sold more of the nation’s shares than they bought.

“Purchases of bond futures by foreign investors today supported the market,” said Huh Kwan, a Seoul-based bond trader at Korea Investment & Securities. “There are doubts whether the European summit will be able to improve anything.”

The yield on the 3.25 percent bonds due June 2015 slid two basis points, or 0.02 percentage point, to 3.27 percent at the close in Seoul, Korea Exchange Inc. prices show. Three-year debt futures climbed 0.7 to 104.82 and one-year interest-rate swaps slid one basis point to 3.33 percent.

The won advanced 0.2 percent to 1,156.17 per dollar, according to data compiled by Bloomberg, trimming this quarter’s decline to 2 percent.

The currency’s one-month implied volatility, a measure of exchange-rate swings used to price options, dropped 32 basis points, or 0.32 percentage point, to 8.02 percent.

“South Korean exporters selling the dollar to convert overseas earnings outweighed foreign investors buying the greenback after selling the nation’s stocks,” said Han Sung Min, a Seoul-based currency dealer for Busan Bank.

To contact the reporter on this story: Jiyeun Lee in Seoul at jlee1029@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net


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