However, a BOK official warned the bond market was overshot.“Considering the views among the monetary policy board members, market expectations (for an imminent rate cut) were overdone,” said a BOK official.“There are many variables that could play against market expectations.”Ahn Jae-kyun, a fixed-income strategist at Shinhan Investment & Securities, said that a rise in public service prices due for the second half of this year would add to inflationary pressure and thus, the fall in treasury bond yields below 2% would be short-lived.“Korean bond dealers don’t’ feel like buying three-year treasuries below 3.1%,” said a fixed-income trader.“It looks like only foreigners are buying (Korean) treasuries.”On Tuesday, the three-year treasury yield closed morning trade at 2.988%, up 0.010 percentage point from Monday's finish.
South Korea’s treasury bond yields fell to their lowest points in more than two years, breaching below the 3% level for the first time since April 2022 as the unexpected economic slowdown in Asia’s No.4 economy in the second quarter bolstered expectations of at least two interest rate cuts within the year.
The government bond market has priced in two rates cuts each by 25 basis points within the year, after the Bank of Korea kept its base rate at 3.50% for 18 months in a row this month.
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