South Korean treasury bonds rose on Friday in a regional flight to safer assets on concerns over European debt problems and the US job market conditions. The finance ministry is set to issue 2.5 trillion won ($2.14 billion) in five-year treasury bonds on Monday while the central bank will sell 6 trillion won in monetary stabilisation bonds.
One-year interest rate swaps fell to a two-month low of 3.35 percent while front-end Treasury bond futures hit a two-month high. The Bank of Korea is widely expected to keep rates on hold at record-low 2.00 percent at the February 11 monetary policy meeting, the second to last for incumbent governor Lee Seong-tae.
The yield curve steepened as investors favoured long-end bonds over high-priced short-dated issues. The benchmark five-year treasury bond yield fell 5 basis points to a near two-week low of 4.79 percent while the one-year bond yield slid 3 basis points to 3.13 percent, the lowest since December 3,2009.