The South Korean government bonds closed higher on Monday as investors poured into safe-haven instruments amid losses in riskier assets including crude oil and stocks. Also, investors preferred to trade in fixed income securities after the Bank of Korea unexpectedly lowered its key policy rate by 25 basis points to new record low of 1.25 percent on last Thursday.
The 10-year bonds yield, which moves inversely to its price fell more than 2 basis point to 1.619 percent, short-term 3-year bonds yield dipped ½ basis point to 1.313 percent and the super-long 20-year bonds yield slid 2-1/2 basis point to 1.725 percent.
Today, crude oil prices fell below $50 in a week as US drilling data showed another uptick, reinforcing views that the recent rally may restrain the rebalancing in oil markets. The International benchmark Brent futures fell 1.09 percent to $49.99 and West Texas Intermediate (WTI) dipped 1.08 percent to $48.54 by 06:20 GMT.
The Bank of Korea’ (BoK) monetary policy board member decided to lower the nations benchmark lending rate by 25 basis points to new recode low of 1.25 percent, from previous 1.5 percent. This decision was supported by the neutral and exceedingly low inflation.
South Korea's central bank governor Lee said that today's rate cut decision was unanimous and monetary policy will continue to remain accommodative. He further added that the economic growth path will be weaker than expected and inflation will remain below 2 percent for some time, downside risks to growth have increased for H216. Similarly, South Korea's Finance minister Yoo said that economy is likely to benefit from the BoK's interest rate cut.
Markets will remain keen to focus on unemployment rate on Wednesday and trade balance data on Thursday. However, investors will also look forward to the FOMC statement on Wednesday, accompanied by updated economic projections and followed by Fed Chair Yellen’s press conference.
Meanwhile, The Korea Composite Stock Price Index (KOSPI) closed down 1.91 percent at 1,979.06 points.
The material has been provided by InstaForex Company – www.instaforex.com