South Korean treasury bonds rallied on Friday as the central bank stepped back from its previous strong warnings of an early rate hike on signs of a moderating property market boom. The Bank of Korea (BOK) held interest rates steady at a record low as expected and tempered some bets they could rise as soon as November.
"The central bank governor apparently toned down his very hawkish stance, hinting that rates would stay low if government measures can check the property market," said Jung Sung-min, a fixed-income analyst at Eugene Futures. The three-year Treasury bond yield plunged 11 basis points to 4.36 percent, returning to the level prior to Australia's sudden rate hike on Tuesday, while front-end bond futures posted their biggest daily gain in two months. The one-year interest rate swap fell from its yearly high seen on Thursday while the three-month certificate of deposit rate rose for a ninth consecutive session.
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