South Korean government bond prices soared on Friday, buoyed by hopes for parliament to approve a tax incentive bill for bonds next week. The bill to exempt foreign investors from income taxes on bond investment was passed by a parliamentary panel earlier on Friday and is awaiting the final approval of a parliament session slated for April 29.
"The tax incentive scheme should draw more foreign investors, who have recently emerged as key buyers in the debt market," said Jung Sung-min, a fixed-income analyst at Eugene Futures. He said that despite the latest rallies, South Korean debt was still very attractive to foreign investors as they could enjoy higher domestic interest rates and favourable terms in dollar-won swaps.
Debt investors largely ignored official data showing that the economy averted a recession in the first quarter as expected and instead bet on a very slow economic recovery and no immediate rate increases. The yield on benchmark 5-year treasury bonds dropped 14 basis points to 4.18 percent and the 3-year treasury yield fell 13 basis points to 3.57 percent. June treasury bond futures jumped 51 ticks to 111.75.