South Korea treasury yields hit 32-month lows on surprise rate cut

SEOUL: Round-up of South Korean financial markets:

South Korea stocks edge higher as chip makers gain after Nvidia earnings

• South Korea’s treasury bond yields dropped to their lowest levels in 32 months on Thursday, as the country’s central bank cut interest rates for the second straight meeting in a row, bucking market expectations.

• The won weakened, though its losses were capped amid suspicions of intervention by authorities, while stocks were flat.

• The most liquid three-year Korean treasury bond yield was down 11.2 basis points at 2.643% at 0632 GMT, and the benchmark 10-year yield was down 9.4 bps at 2.795%. Both hit their lowest levels since late-March 2022 earlier in the session.

The Bank of Korea delivered a surprise interest rate cut and signalled more to come, as economic growth faltered and policymakers turned a wary eye to trade risks from a second Donald Trump presidency.

• It was the first time since 2009 the central bank lowered interest rates for two consecutive meetings.

• “The central bank expressed its will to boost the economy with the surprise cut, which should be welcomed as there had not been any economic stimulus policy in Korea, unlike in the United States, Europe and China,” said Lee Kyoung-min, an analyst at Daishin Securities.

• Reaction in the foreign exchange market was comparably limited. The currency was last quoted at 1,395.6 per dollar on the onshore settlement platform, 0.20% lower than its previous close at 1,392.8.

• South Korea’s foreign exchange authorities were seen selling US dollars to cap losses in the won, according to local dealers.

• In the stock market, the benchmark KOSPI closed up marginally by 1.61 points, or 0.06%, at 2,504.67.

• Foreigners were net sellers of shares worth 492.1 billion won ($352.6 million).