South Korea bonds gain despite strong economic data

The South Korea’s 10-year bond prices gained despite strong economic data. Moreover, consumer sentiment ticked up and its finance minister sounded upbeat on exports turning the corner, but bond market investors still bet on interest rates, already at record lows, coming down further. The March consumer confidence index rose to 100, from 98 in February. 

Also, Finance Minister Yoo Il-ho told a forum exports this month would be better than in January and February, when overseas sales plunged by a combined 15.7 pct over a year earlier after a 12.0 pct fall during the final quarter of 2015.

Meanwhile, the benchmark 10-year bond yield fell 1.90 pct and 3-year bonds yield dipped 2.22% to 1.45 at 7:50 AM GMT.

Apart from this, the Bank of Korea's monetary policy committee meets next week on April 19 to set the 7-day policy interest rate, which has been left unchanged at record-low 1.5 pct after seven rounds of reduction until June last year.

We foresee that there is increasing speculation that the BOK may cut borrowing costs that are already at a record low, pushing bonds prices further up.