South Korean government bond yields rose on the morning of the 6th, with the 3-year benchmark yield climbing 1.8 basis points to 3.695% as of 11:09 AM. The 10-year yield advanced 0.1 basis point to 4.156%, while the 30-year yield declined 0.7 basis points to 4.509%, according to the Seoul bond market. Foreign investors net purchased 6,343 contracts of 3-year bond futures and 465 contracts of 10-year bond futures during the session. The yield increases occurred amid heightened attention on foreign buying activity and level resistance psychology following a recent sharp rally in bond prices. Market participants observed that bonds opened strong on initial foreign buying but later reversed to show yield increases as caution over elevated price levels took hold. The Korean stock market experienced significant declines with a sell-side circuit breaker triggered on the KOSPI, though bond yield declines remained limited despite the equity weakness.
Foreign Investors Net Purchase 6,343 Contracts of 3-Year Bond Futures
Foreign investors net purchased 6,343 contracts of 3-year government bond futures and 465 contracts of 10-year bond futures on the 6th. The 3-year bond futures traded at 103.53, unchanged from the previous day, while 10-year bond futures rose 2 ticks to 106.89. Market participants focused on the foreign buying activity in the absence of significant new catalysts. Bonds opened with strength as foreign buying was confirmed early in the session, but the rally gradually narrowed and benchmark government bond yields reversed to show increases in exchange trading.
The dollar-won exchange rate traded at 1,416 won, down 8.50 won from the previous day. US Treasury yields showed limited volatility in Asian market hours, with the 2-year yield rising 0.20 basis points and the 10-year yield falling 0.60 basis points. International oil prices remained range-bound.
Bond Dealers Cite Level Resistance After Recent Rally
A bond dealer at a securities firm stated, "We are taking a conservative view given that the rally has been too rapid recently," adding, "There is a sense that further market strength is limited as special bond issuance rates today were not significantly lower." Another bond dealer at a different securities firm noted, "Whether further strength continues depends on whether futures buying, estimated to be from CTAs, continues," adding, "Local institutions appear to have insufficient 2-to-10-year delta positions."
The dealer added, "However, there is a sense of burden given that levels have come down significantly," stating, "Strength in the 1-year segment where carry is secured is somewhat limited."
FAQ
What happened to South Korean government bond yields on the morning of the 6th?
The 3-year benchmark government bond yield rose 1.8 basis points to 3.695% and the 10-year yield increased 0.1 basis point to 4.156% as of 11:09 AM on the 6th, according to the Seoul bond market. The 30-year yield declined 0.7 basis points to 4.509%.
How much did foreign investors buy in bond futures on the 6th?
Foreign investors net purchased 6,343 contracts of 3-year government bond futures and 465 contracts of 10-year bond futures during the session on the 6th.
Why did bond yields reverse to show increases after opening strong?
Bond dealers cited level resistance psychology after a recent sharp rally in bond prices. One dealer stated that the market is taking a conservative view given the rapid pace of the recent rally, and another noted a sense of burden given that yield levels have declined significantly.
