Bond yield drops to five-year low as inflation loses steam

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Bond yield drops to five-year low as inflation loses steam

Korea’s benchmark five-year bond yield fell to an all-time low after the government reported the slowest inflation in 12 years.

The nation’s debt and the won were also supported by speculation the U.S. Federal Reserve will press ahead with a third round of quantitative easing, a policy that boosts the supply of dollars and spurs demand for emerging-market assets.

Fed Chairman Ben S. Bernanke said on Friday that U.S. joblessness was a “grave concern” and that further monetary easing cannot be ruled out.

“There are hopes for a liquidity-driven rally as Bernanke signaled further stimulus and foreign investors are buying aggressively,” said Lee Seung-hoon, a fixed-income analyst at Samsung Futures in Seoul. “The inflation data gave an added boost to the bond market.”

Bloomberg

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