South Korean three-year government bond prices rebounded from a two-day decline on Friday, but five-year treasuries fell further as output data suggested economic recovery was underway but at a very slow pace. Domestic factory output rose in April for a fourth straight month, but at a slower rate and manufacturers' sentiment toward the next month improved.
"The data gave little cause for surprise," said Park Tae-keun, a fixed-income analyst at Hanwha Securities. "The economy has apparently turned a corner, but it will take a while to see a meaningful recovery." Increased uncertainty over relations with North Korea also kept debt investors away from longer-dated notes, he said.
The yield on three-year treasury bonds dropped 4 basis points to 3.83 percent despite a planned issuance of 2.4 trillion won ($1.91 billion) in new three-year bonds on Monday. Meanwhile, the yield on five-year government bonds rose 1 basis point to 4.67 percent, making a steeper yield curve.