Foreigners buy S.Korean bonds on expectations for rate cut

Source: Xinhua| 2019-06-13 14:02:30|Editor: Shi Yinglun
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SEOUL, June 13 (Xinhua) -- Foreign investors bought South Korean bonds on expectations for the interest rate cut and the local currency's depreciation to the U.S. dollar, central bank data showed Thursday.

Foreign capital worth 6.04 billion U.S. dollars flowed into the domestic bond market in May, according to the Bank of Korea (BOK). It was the biggest in about 11 years since April 2008.

It was credited to the local currency's descent to the dollar, which led foreigners to purchase the undervalued won-denominated bonds.

The won/dollar exchange rate stood at 1,190.9 won per dollar as of end-May, up 22.7 won from a month earlier.

Expectations ran high for the BOK's rate cut from the current 1.75 percent, leading to a higher price of local bonds. The bond price moves inversely with the bond yield.

Foreign funds worth 2.58 billion dollars flowed out of the local stock market in May on the weakened demand for risky assets, caused by the global trade dispute.

The volatility in the won/dollar exchange rate increased to 0.30 percent in May from 0.28 percent in the prior month.

The premium for credit default swaps, which gauges credit risks for the five-year sovereign debts, averaged 35 basis points in May, up 3 basis points from the previous month.