South Korean bond prices ended steady on Friday, as a Japanese interest rate cut fanned hopes for additional domestic policy easing, keeping investors from dumping bonds to take profits from recent heavy gains. The Bank of Japan cut its key interest rates to 0.1 percent from 0.3 percent on Friday, warning economic troubles could become more severe in the near term.
The yield on 5-year treasury bonds finished unchanged from Thursday's close of 4.16 percent, the lowest level since June 2005. The yield has slid nearly 90 basis points so far in December. Meanwhile, March treasury bond futures ended down 10 ticks at 111.40.
"Japan's policy easing will likely have a considerable impact on the next Bank of Korea decision," said Choi Suk-won, a fixed-income analyst at Samsung Securities. South Korean central bank chopped the base rate by 2.25 percentage point since early October in four steps to a record low of 3.00 percent to avert a recession. The Bank of Korea will review its policy on January 9.
The yield on certificates of deposit fell further, declining 5 basis points to a 3-year low of 4.19 percent amid signs of the credit crunch thawing after the launch of a bond market stabilisation fund this week. The Bank of Korea contributed about 2.1 trillion won ($1.63 billion) to the fund.