South Korean bond prices ended mixed on Friday, with longer-dated bonds extending their rally while shorter paper was weighed down by profit-taking as traders sought clarity on the market's next direction. The yield on 1-year treasury bonds held steady at 2.70 percent, pausing after an 8-session rally, whereas 3- and 5-year treasury yields rose.
The June contract on 3-year treasury bonds fell 11 ticks to 110.87. South Korea's domestic bond market has been rallying on increasing cash liquidity for investment in fixed-income assets after the country tightened rules on lending-to-deposit ratios at commercial banks and as stock markets remain shaky.
Bond prices have also been supported by increasing expectations that South Korea's central bank will keep the policy interest rate at the current record-low level for a longer period than initially expected.
The 1-year treasury bond yield has not risen since February 22, falling by a total of 44 basis points over the period. Yields on longer-dated papers have also dived over the past several weeks. Analysts said the bond market would continue to be supported until investors see fresh data clearing up concerns that the global economy's recovery was losing momentum along with fading stimulus measures.
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