S.Korean bond futures hold firm despite inflation

SEOUL: South Korean treasury bond futures edged higher early on Wednesday as concerns about the global economic impact from the Middle East turmoil offset the increased case for an interest rate increase to counter growing inflation.

March-delivery futures on 3-year treasury bonds rose 0.03 point to 103.03 after the first 15 minutes of trade despite data showing the country's consumer inflation spiked more than expected to a 27-month high in February.

"The inflation data is clearly a drag on bonds but external factors that we are seeing as of this morning are providing some boost," said Yum Sang-hoon, a fixed-income analyst at SK Securities, referring to the unrest in the Middle East.

Higher domestic inflation should raise the pressure on the Bank of Korea to raise interest rates but the uncertain political situation in parts of the world can persuade policymakers to hold fire until the situation settles down.