South Korean 10-year yields close highest in one year following U.S. Treasuries rout

The South Korean 10-year bond yields ended highest in one year on Thursday, following the current rout in U.S. Treasuries as OPEC agreed to lower production.

The 10-year bond yield, which moves inversely to its price, closed 5-1/2 basis points higher at 2.20 percent, the yield on 20-year note jumped 6 basis points to 2.21 percent and short-term 3-year bonds yield bounced 1-1/2 basis points to 1.72 percent.

The Korean bonds have been closely following developments in the U.S. debt market. The United States benchmark 10-year Treasury yield climbed 2 basis points to 2.38 percent post-OPEC deal.

Crude oil prices rallied after OPEC agreed to output cuts in OPEC ministerial gathering at Vienna yesterday. The International benchmark Brent futures rose 1.10 percent to $52.41 and West Texas Intermediate (WTI) jumped 1.05 percent to $49.96 by 05:30 GMT.

The Organization of the Petroleum Exporting Countries (OPEC) has agreed to cut production by roughly 1.2 Mb/d to 32.5, which equates to a 4.5-4.6 percent cut per member country. We believe the outcome is consistent with our view of what OPEC production levels were expected to be in 2017 irrespective of the deal reached yesterday, reported Barclays in its research note.

In other words, the meeting is highly unlikely to substantially affect the oil market balance.  Compared with our assessment of OPEC supply last month, we have adjusted our first-quarter of 2017 production estimate lower by 350 kb/d, which will result in a slightly steeper draw than our balances were forecasting, they added.

Moreover, South Korean president Park Geun-hye has asked parliament to come up with a way for her to relinquish power on Tuesday and to deal with all affairs including when she should step down. She said that apologises for causing concern over her shortcomings.

According to BBC news, huge rallies have been held across South Korea on Tuesday for what are thought to be the largest protests so far demanding President Park Geun-hye steps down. Ms Park is accused of allowing her friend, Choi Soon-sil, to manipulate power from behind the scenes. The president has apologised twice, but has so far resisted calls to resign.

Meanwhile, The Korea Composite Stock Price Index (KOSPI) ended flat at 1,983.75 points.