S. Korean bonds close lower as KOSPI gains for fifth consecutive day

The South Korean government bonds closed lower Friday as benchmark KOSPI gained for fifth consecutive day on stronger overseas demand. Also stronger-than-expected producer prices data for June, coupled with maintained improvement in jobless claims drove-out investors from safe-haven buying.

The 10-year bonds yield, which moves inversely to its price, rose 3 basis points to 1.396 percent, short-term 3-year bonds yield jumped 2 basis points to 1.223 percent and the super-long 20-year bonds yield bounced more than 2 basis points to 1.471 percent.

The June US Labor Department producer prices index (PPI) report revealed an overall increase of +0.5 percent m/m result, comes in above market expectations for a +0.3 percent m/m reading, as compared to the +0.4 percent m/m increase that occurred in May.

Similarly, the US Initial jobless claims for the week ending 9 July held unchanged at 254k, well below expectations for a 265k result, from the unrevised 254k reading seen in the week prior.

According to Bloomberg, the local currency rose to a 12-week high as global funds purchased more than $1.6 billion of the nation’s equities this week, and the KOSPI index closed at its highest level in a month.

The Bank of Korea (BoK) in its Thursday’s monetary policy meeting left its seven-day repurchase rate unchanged at record low levels of 1.5 percent to anticipate the impact of fiscal stimulus and Brexit.

Moreover, the central bank also lowered its Gross Domestic Product (GDP) growth and inflation forecast for 2016 to 2.7 percent and 1.1 percent, from 2.8 percent and 1.2 percent, respectively.

Meanwhile, The Korea Composite Stock Price Index (KOSPI) closed up 0.42 percent or 8.49 points at 2,017.26.