South Korean domestic bond prices fell on Monday, with long-term debt hit harder, as the central bank's upgrade of its economic growth forecast persuaded traders to book profits from the market's rally this year. The 5-year treasury bond yield rose 10 basis points to 4.53 percent while the 1-year yield gained a smaller 3 basis points to 2.68 percent, whereas the June contract on 3-year treasury bond futures shed 24 ticks to 110.70.
Analysts said investors also preferred to stay away from the market as a series of Chinese economic indicators due out soon could influence the local as well as international markets. "I don't think the market's overall policy view has changed significantly, but the strong economic growth prospects ahead of the Chinese data releases hurt buying sentiment," said Yang Jin-mo, a fixed-income analyst at SK Securities.
The Bank of Korea said before trading started on Monday it was raising its forecast for this year's economic growth to 5.2 percent, which would be the highest since 2004, from 4.6 percent forecast in December last year. China is due to announce some of its top economic indicators such as first quarter gross domestic product data this week, which analysts said could influence regional as well as global financial markets.
The finance ministry's auction of 2.6 trillion won ($2.33 billion) worth of 5-year treasury bonds was 2.6 times subscribed, slightly less than the previous auction early last month that had been more than 3 times subscribed. Investors are now paying a close eye on Finance Minister Yoon Jeung-hyun's testimony before a parliamentary committee on Tuesday for clues on the ministry's view on the timing for interest rate increases.
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