South Korea’s bonds fell, driving the five-year yield up by the most since September 2011, stocks pared gains and interest-rate swaps climbed after the central bank unexpectedly refrained from cutting borrowing costs.
Bank of Korea Governor Kim Choong Soo and his board held the benchmark seven-day repurchase rate at 2.75 percent, the authority said in a statement in Seoul today. Eleven of 20 economists surveyed by Bloomberg News forecast a reduction as tensions with North Korea threaten to damp business and consumer sentiment. The won rose the most in more than two weeks as global funds boosted holdings of South Korean shares.
“The Bank of Korea made an independent decision” amid pressure from the government to act, said Lee Jae Seung, a fixed income strategist at KB Investment & Securities Co. in Seoul. “The decision shows the central bank isn’t assessing that the economy is weakening both at home and overseas.”
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