South Korean government bond prices gained on Monday after several days of sell-offs, buoyed by falling import price data and a cautious economic assessment by a top policy maker. Official data showed that import prices in May fell by the most in a decade, suggesting a marked easing in consumer inflation pressure, while the finance ministry stressed the need to maintain the accommodative policy stance.
"Today's upswing does not mean market players have dropped their bets for an early rate increase sparked by the central bank's conclusion last week that the worst was behind us," said Moon Byung-sik, a fixed-income analyst at Daishin Securities.
"But the outlook is still murky and policymakers will be one of the last who want soaring interest rates as it could damp growth momentum so easily," he said. Over the primary market, the finance ministry sold 1.34 trillion won ($1.06 billion) in ten-year treasuries at an average yield of 5.39 percent, while the central bank issued short-dated monetary stabilisation bonds about 1 trillion won less than planned at 6.5 trillion won.
The yield on three-year government bonds fell 3 basis points to 4.27 percent and the yield on five-year government bonds dropped 4 basis points to 4.86 percent. The June treasury futures contract rose 22 ticks to 109.85, paring some of a 181-tick drop seen throughout last week.