On October 17, government bond yields in South Korea fell across the board as concerns over bad loans at U.S. regional banks heightened demand for safe-haven assets.
In the Seoul bond market, the yield on three-year government bonds closed at 2.555% per annum, down 1.4 basis points (1bp = 0.01 percentage point) from the previous trading day. The yield on 10-year government bonds dropped by 2.3 basis points to 2.885%. The yields on five-year and two-year government bonds each declined by 1.8 basis points, ending at 2.666% and 2.493%, respectively. The 20-year bond yield fell by 2.1 basis points to 2.845%. The yields on 30-year and 50-year bonds decreased by 1.6 and 1.8 basis points, closing at 2.776% and 2.626%, respectively.
The decline in government bond yields across all maturities was influenced by the emergence of bad loan issues at U.S. regional banks. Zions Bancorporation revealed that its subsidiary, California Bank & Trust, had written off $50 million in commercial and industrial loans as accounting losses.
However, with heightened caution ahead of the Bank of Korea's Monetary Policy Board meeting scheduled for October 23, the extent of the yield decline appeared somewhat limited. Foreign investors recorded net purchases of 12,509 contracts of three-year government bond futures and 4,125 contracts of 10-year government bond futures.
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