South Korea’s government bonds rose, pushing the three-year yield to a two-week low, as concern Europe’s debt crisis will worsen spurred demand for the safest assets. The won strengthened as exporters repatriated income ahead of the Chuseok holiday.
Spain’s 10-year yield topped 6 percent yesterday as protesters marched for a second night in Madrid, calling on Prime Minister Mariano Rajoy to reverse austerity measures as his nine-month-old government prepared its fifth package of budget cuts. South Korean manufacturers’ confidence fell toward the lowest level since 2009, a monthly report by the central bank showed today. The Kospi index fell for a third day. Local financial markets are closed Oct. 1 for a public holiday.
“The market’s focus has moved again to Europe with protests in Spain heightening political risks,” said Lee Hak Seoung, a fixed-income analyst at Tong Yang Securities Inc. in Seoul. “Still, with Korean bonds having been supported so far, I don’t see much room for further gains.”
The yield on the government’s 3.25 percent bonds due June 2015 fell for a fourth day, declining one basis point to 2.78 percent as of 9:50 a.m. in Seoul, Korea Exchange Inc. prices show. The rate for benchmark three-year bonds dropped 52 basis points this quarter. The one-year interest-rate swap was little changed today at 2.88 percent.
The currency strengthened 0.1 percent to 1,119.40 per dollar, contributing to a 2.3 percent gain for the quarter, according to data compiled by Bloomberg. One-month implied volatility, a measure of exchange-rate swings used to price options, dropped 23 basis points, or 0.23 percentage point, today to 6.43 percent.
“Exporters’ selling the dollar to convert currency is concentrated with the Chuseok holiday and end-of-quarter nearing,” said Cho Young Bok, a Seoul-based currency trader for Daegu Bank.
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