South Korea’s sovereign bonds fell and the won declined to a four-week low as investors sought the safety of the dollar amid a global debt selloff.
The benchmark 10-year yield jumped the most since June 2013 and the Korean currency retreated for a second day as demand for riskier emerging-market assets ebbed following declines in U.S. and European bond markets. Finance Minister Choi Kyung Hwan said Monday that gross domestic product will probably increase 1 percent this quarter from the previous three months, when it rose 0.8 percent.
The yield on notes maturing in September 2014 rose 14 basis points to 2.60 percent, the highest since Jan. 5, Korea Exchange prices show. The won fell 0.4 percent to 1,095.85 a dollar as of the 3 p.m. close in Seoul, data compiled by Bloomberg show. That’s the weakest level since April 15. The currency has lost 2.2 percent this month.
“Sovereign bond yields rose too fast globally, and this weakens the won as investors are feeling nervous,” said Hong Seok Chan, a Seoul-based currency analyst at Daishin Economic Research Institute. “The won could test as low as 1,100 a dollar soon.”
Choi on Monday reiterated his view that it’s too early to discuss a supplementary budget, Yonhap Infomax reported. He said May 3 that growth this year will be similar to the 3.3 percent expansion in 2014. The economy is showing a moderate recovery while uncertainties such as a weaker yen and the possibility of higher U.S. interest rates persist, the Finance Ministry said in a monthly report released Tuesday
The yield on the sovereign notes due December 2017 rose seven basis points, or 0.07 percentage point, to 1.94 percent, Korea Exchange prices show.
“Both foreign and local brokerages are selling bonds as yields overseas jumped,” said Kim Myoung Sil, a fixed-income analyst at KB Investment & Securities Co. in Seoul. “Finance Minister Choi expressed optimism for the second quarter again, and the better economic outlook erodes attractiveness in bonds.”
original source: http://www.bloomberg.com/news/articles/2015-05-12/korea-won-bonds-drop-as-global-debt-selloff-deters-risk-taking