SEOUL: South Korean government bond prices rallied across the board on Thursday as concerns about the health of the world economy drove global stocks lower and boosted the safe-haven appeal of the top-rated bonds.
Yields fell across the curve to record-low closing levels, while those on the 1- and 3-year treasury bonds fell further below the central bank's 7-day policy interest rate as investors saw increasing chances of a rate cut.
The 1-year yield shed 4.6 basis points to end at 1.451 percent and the 3-year yield dropped by 5.6 basis points to 1.450 percent, each marking the biggest daily falls since May last year, the Korea Financial Investment Association quoted.
Yields moved sharply also because local markets, which were closed for the past three days for the Lunar New Year break, were catching up with the global market movements over the period.
"It was basically a catch-up rally after the long holiday as bond yields fell sharply in US and other regions while expectations for a rate cut (by the South Korean central bank) also keep growing," said Kong Dong-rak, a fixed-income analyst at Korea Asset Investment Securities Co.
The Bank of Korea kept its policy rate on hold for a seventh consecutive month at its last meeting on Jan. 11, and did not provide any signals on policy direction. But signs of weakening in the economy have since boosted the case for a cut.
The central bank is due to review its 1.50 percent policy rate on Feb. 16.
As the Bank of Korea came under increasing pressure to cut the interest rate, the 3-month certificate of deposit rate, the country's benchmark money market rate, fell by 1 basis point to 1.64 percent - the lowest since late November last year.
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