South Korean government bond prices fell sharply for a second day on Monday, jolted by concerns about the won's further weakness and its impact on inflation. The won hit a near four-year low against the dollar on persistent global credit worries despite the reported dollar-selling intervention by South Korean authorities and a considerable retreat in oil prices on Friday.
"The won is expected to lose more gound and the current account likely to stay in a deficit for a while as a result," said Moon Byong-sik, an analyst at Daishin Securities Co. "This means the central bank is having more hard times in curbing inflation expectations despite its rate hike early this month," he said.
The yield on benchmark five-year treasury bonds jumped 7 basis points to 5.96 percent, the highest since July 21 when it hit 6.12 percent. September treasury bond futures slid 18 ticks to end at 105.48, after tumbling more than 20 ticks earlier in the day.
On the primary market, South Korea's Finance Ministry sold 478 billion won ($445.5 million) of 20-year treasury bonds at a yield of 6.03 percent, after initially offering 500 billion won in the auction. The Bank of Korea also held an auction to issue three trillion won worth of monetary stabilisation bonds with various maturities on Tuesday.
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