Bloomberg News

Korea’s Bond Yields at One-Month High After Jobless Rate Drops

August 16, 2012

South Korea’s five-year government bond yields climbed to a one-month high after the nation’s unemployment rate unexpectedly fell, suggesting the economy remains resilient.

The jobless rate eased to a seven-month low of 3.1 percent in July from 3.2 percent in June, Statistics Korea reported today. The median estimate in a Bloomberg survey was for a rate of 3.3 percent. Ten-year U.S. Treasury yields rose to the highest in almost three-months after a Goldman Sachs Group Inc. report said the Federal Reserve will next month hold off from a third round of bond buying, known as quantitative easing, as economic data improves. The won fell.

“After some good data this week, sentiment for safer assets has weakened,” said Huh Kwan, a Seoul-based trader at Korea Investment & Securities Co. “The Korean bond market is retreating as global yields jumped on waning expectations for more stimulus from central banks.”

The yield on the government’s 3.5 percent bonds due March 2017 increased 10 basis points, or 0.10 percentage point, to 3.09 percent in Seoul, the highest level since July 11, Korea Exchange Inc. prices show. Three-year debt futures were 105.63 from 105.92 on Aug. 14. Seoul’s financial markets were closed yesterday for a public holiday.

The won weakened to 1,134.15 per dollar from 1,129.78 at the close on Aug. 14 in Seoul, according to data compiled by Bloomberg. One-month implied volatility, a measure of exchange- rate swings used to price options, rose to 7.34 percent from 7.18 percent before yesterday’s holiday.

“The market is taking a break, reassessing the possibility of more global stimulus after recent economic data from the U.S. and Europe,” said Kang Pan Seok, a currency strategist at Woori Futures Co. in Seoul. “I don’t see any big swings in the currency markets at the moment.”

To contact the reporter on this story: Kyoungwha Kim in Singapore at kkim19@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net


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