SEOUL: South Korean treasury bond prices were almost unchanged on Wednesday as the impact from high inflation was offset by speculation that turmoil in Libya would prompt the central bank to keep policy on hold next week.
The benchmark 5-year treasury bond yield ended unchanged at 4.28 percent while the 10-year yield added 1 basis point to 4.68 percent. March-delivery futures on 3-year treasury bonds fell 0.04 point to 102.96.
"The turmoil in Libya will make it difficult (for the central bank) to raise interest rates despite concerns about inflation," said a bond dealer at a domestic securities company.
"The monetary policy committee has tended to be more sensitive to external factors than domestic ones," he said, referring to the policy-making board of the Bank of Korea.
Data released before markets opened on Wednesday showed South Korea's annual inflation in February quickened more than expected to a 27-month high of 4.5 percent, also far above the 4 percent ceiling of the central bank's target band. The data in principle increases the chances for monetary policy tightening but investors bet the Bank of Korea, which has repeatedly wrong-footed market expectations, would possibly pay more attention to the political unrest in the Middle East.
Foreign investors were in fact net buyers of more than 4,000 contracts in the 3-year treasury futures trading.
The won also finished the domestic session almost unchanged, while Seoul shares fell more than half a percent.
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