SEOUL: South Korean bond prices crawled up early on Tuesday, after Standard & Poor's cut of the US credit outlook stoked market talk that developed countries' growing fiscal problems could sap global demand and delay interest rate rises.
S&P warned it would downgrade the United States' AAA credit rating unless the Obama administration and Congress found a way to slash the yawning federal budget deficit within two years.
"From the perspective of the domestic debt market, it can be seen as a positive factor," said Daewoo Securities bond analyst Yoon Yeo-sam.
"Stock markets are likely to undergo a correction and monetary policy normalisation is highly likely to be delayed further."
The yield on 3-year treasury bonds was down one basis point to 3.69 percent. Three-year treasury futures for June delivery rose 0.06 points to 103.22.
Foreign investors remained net buyers, picking up a net 244 billion won worth of the treasury futures as of early morning, while unloading a net 197 billion won on the Seoul bourse.
On Monday, bond yield curves flattened buoyed after an auction of 10-year treasury bonds underscored strong demand while the Seoul stock market consolidated near a record high.
Treasury yields have been range-bound in the past month, stuck in a tug of war between caution against prospective interest rate rises on inflation risks, and steady buying from foreign investors on expectations of the won advance.
The won slipped against the dollar, quoted at 1,092.40/90 versus Monday's domestic close of 1,088.4. It has swung within the 1,080-1,100 range for nearly three weeks.
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