SEOUL: South Korean government bond prices slid on Monday, with the 10-year paper suffering its longest losing streak on record, as the president's upbeat remarks on the economy eased the case for an interest rate cut soon.
Bond yields rose across the board, with the benchmark 10-year yield rising 7.2 basis points to 2.486 percent, the highest since Jan. 9 and the 10th consecutive session of increase - the longest ever.
President Park Geun-hye said during a scheduled meeting with her senior secretaries early on Monday that the economy was showing signs of improving following fiscal and monetary stimulus and could show a more pronounced recovery soon.
"President Park's remarks combined with a similarly rosy view from the finance minister over the weekend to weaken the case for an additional interest rate cut soon," said Yoon Yeo-sam, a fixed-income analyst at KDB Daewoo Securities.
Finance Minister Choi Kyung-hwan told reporters on Sunday the economy would likely grow this year at a similar rate to the 3.3 percent growth set in 2014, which would be higher than the central bank's 3.1 percent forecast.
Investors have already been scaling back their bets on another interest rate cut as inflation and overall growth in Asia's fourth-largest economy were seen improving.
As the rate-cut views eased, the yield spread between 10- and 1-year treasury bonds has widened to 71.4 basis points on Monday, the widest since Sept. 25 when the spread was 73.0 basis points.
The Bank of Korea surprisingly cut the policy interest rate by 25 basis points to a record low of 1.75 percent in March and for some time the market had priced in high chances for another cut soon.
The central bank kept the rate unchanged in April and will next meet on May 15.
On Monday, Bank of Korea Governor Lee Ju-yeol expressed reservations over the need for further rate cut, saying that net effects of further interest rate cuts on boosting consumer spending need to be reassessed.
The Bank of Korea has the right to set interest rates independently, but analysts believe the government wields a strong influence.
Both Choi and Lee were speaking to South Korean reporters on the sidelines of an Asian Development Bank meeting in Azerbaijan.
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