The yield curve on South Korean treasury bonds steepened slightly on Tuesday, with China's credit controls and a central bank statement reinforcing the view that interest rates would stay low for several more months. With China's move to tighten loans sparking global safety bids, the Bank of Korea reaffirmed its pledge to keep easy monetary policy for the time being to help the private sector gain sustainable growth momentum.
"The recent global economic uncertainties are such that the short-dated bonds will likely enjoy a further rally," said Lee Seung-su, a fixed-income analyst at KTB Securities. The three-year treasury bond yield stayed flat at Friday's closing of 4.12 percent while the 10-year yield rose 1 basis point to 5.30 percent after a sizable auction.
On the primary market, the finance ministry sold about 1.6 trillion won ($1.40 billion) worth of 10-year bonds at an average rate of 5.31 percent. The March treasury futures contract ended unchanged from Friday's closing of 110.37 after moving in and out of positive territory in a limited range.