South Korean treasury futures closed lower after choppy trade on Friday, with early gains sparked by a freeze in the policy rate and soft comments from the central bank chief eclipsed by the prospect of future rate increases. The Bank of Korea kept interest rates on hold, indicating it wanted more time to assess the impact of a rise in January.
Three-year treasury futures for the March contract edged down 0.01 point to 102.43, after spiking to 102.66 at one point. The central bank is expected to deliver an interest rate rise by 25 basis points to 3.00 percent in March, showed a Reuters poll conducted after the monthly rate decision. The yield on one-year treasury bonds dropped 2 basis points to 3.94 percent, while the yield on the benchmark five-year treasuries rose 2 bps to 4.47 percent.
Five-year maturities were also under pressure ahead of a monthly auction of 1.96 trillion won on Monday. The five-year interest rate swap rate added 2 bp to 4.25 percent. The won lost 1 percent against the dollar to end near a session low, following the rate decision. Its domestic close of 1,128.6 was the weakest finish since the start of the year, erasing most of its gains made on the year to date.
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