South Korean bonds close lower as consumer prices surge in Oct; 10-year yield hits 5-month high

The South Korean government bonds closed lower Tuesday after recent data showed that the country’s consumer prices rose at the fastest pace in eight months during the period of October, with inflation accelerating faster than expected.

The 10-year bonds yield, which moves inversely to its price, rose 3 basis points to 1.638 percent and short-term 3-year bonds yield climbed 1-1/2 basis points to 1.398 percent.

Overall consumer prices in South Korea were up 1.3 percent on year in October, data released by Statistics Korea showed Tuesday. That exceeded forecasts for 1.1 percent, which would have been unchanged from the previous month following a downward revision from 1.2 percent.

On a monthly basis, inflation was up 0.1 percent following the downwardly revised 0.3 percent gain in September (originally 0.6 percent). Core inflation, which excludes food prices, was flat on month and up 1.8 percent on year. That follows the upwardly revised 0.2 percent monthly increase (originally 0.1 percent) and the upwardly revised 1.7 percent yearly jump (1.3 percent) a month earlier.

Meanwhile, inflation averaged a record low 0.7 percent in 2015. The Bank of Korea expects inflation to gradually accelerate on expected gains in oil prices to hit 1% this year, likely coming near its annual target of 2 percent next year.

Meanwhile, The Korea Composite Stock Price Index (KOSPI) ended 0.04 percent lower at 2,007.39 points.