Government Bond Yields Fall on Foreigners' Futures Buying... 3-Year Bonds Drop to 2.5% Range

On the 2nd, government bond yields fell across the board due to foreign investors' futures buying and a decline in U.S. Treasury yields.

In the Seoul bond market that day, the 3-year government bond yield closed at 2.567% per annum, down 4.0bp (1bp = 0.01 percentage points) from the previous trading day. With yields dropping into the 2.5% range, a new annual low was recorded once again.

The 10-year yield fell 5.4bp to 2.697% per annum. The 5-year and 2-year yields declined by 5.4bp and 3.5bp, closing at 2.596% and 2.639% per annum, respectively. The 20-year yield dropped 4.0bp to 2.653% per annum. The 30-year and 50-year yields fell 4.1bp and 4.2bp, respectively, recording 2.589% and 2.511% per annum.

This is attributed to continued foreign investors' buying of government bond futures amid accommodative domestic monetary policy, as well as the strength of U.S. Treasuries. Bond prices and yields move in opposite directions.

On the day, foreign investors net bought 7,262 contracts of 3-year government bond futures and 9,870 contracts of 10-year government bond futures. Foreign investors have shown a preference for buying government bond futures around the time of last month's Monetary Policy Committee meeting.

The decline in U.S. Treasury yields on the 29th of last month also appears to have influenced the domestic bond market. According to Yonhap Infomax, the U.S. 10-year yield closed at 4.178% per annum, down 8.70bp from the previous day.