SEOUL: South Korean bonds rose in domestic trade Tuesday, with the yield on five-year government debt falling to a record low as political uncertainty in Italy made investors risk averse.
Yield on the five-year treasury bonds fell by four basis points to 2.76 percent, nearly on par with the Bank of Korea's benchmark rate of 2.75 percent.
Yield on the three-year government debt fell three basis points to 2.65 percent, another record low.
"Foreigners are buying a lot in the spot market in addition to futures contracts," one broker said.
Lead March futures on three-year treasury bonds were up 0.11 points at 106.60, with foreigners' net contract purchases valued at 1.24 trillion won ($1.14 billion).
No Italian political party or coalition won enough votes to form a government in the country's parliamentary elections, an outcome that may leave the euro zone's third-largest economy in limbo and potentially destabilise the common currency zone.
Meanwhile, the South Korean won fell for a second consecutive day. The local currency was quoted at 1,088.0 against the dollar at the end of onshore trade, compared with 1,086.3 at the end of the Seoul session on Monday. Local dealers said steady dollar selling by exporters looking to convert their contract payments were limiting the won's decline, with the 1,090 mark seen as a key support level.
"It was a risk-off day abroad, but the stock market didn't fully reflect this; foreign outflows weren't all that big, and I think this may have affected the currency market here as well," one foreign bank dealer said.
The benchmark Korea Composite Stock Price Index ended down 0.5 percent at 2,000.01. Foreigners were net buyers of 123.7 billion won of local shares on Tuesday.
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