South Korean bond prices fell on Monday as firmer oil prices and a weaker won raised concerns inflation would remain high for an extended period. Analysts said investors appeared to have priced in chances for an interest rate increase at the central bank's policy meeting on Thursday, but that uncertainty about the market's direction afterwards kept the market turbulent.
The yield on benchmark five-year treasury bonds ended up 8 basis points at 5.84 percent, while September treasury bond futures declined 27 ticks to 105.62. South Korean bond prices have been fluctuating wildly since early last week, with many investors preferring to stick to the sidelines until they become more certain about the market's long-term prospects.
The Bank of Korea sets interest rates on Thursday. It held the policy rate steady at 5.0 percent for the past 11 months in a row, but its governor said last month he had to stick with its prime task of containing inflation even amid a slowing economy.
Oil rose on Friday in New York on concerns about Iran's nuclear dispute with the West and Nigerian supply snags. The won fell to a 2-week low against the dollar before recovering slightly on reports of dollar-selling intervention by the South Korean authorities.
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