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S.Korean bond yield curve steepens after EU deal

SEOUL, May 10 (Reuters) - South Korean domestic bond prices fell across the board on Monday as a massive package to help stave off a eurozone debt crisis dented the safe-haven appeal of government bonds. Long-dated bonds were hit especially hard as uncertainty persisted over the the region's long-term financial market stability, resulting in a steepening in the government bond yield curve, traders said. "The eurozone deal was generally accepted as being more supportive of risky assets than bonds, although the won's rebound lent support to bonds," said Yoon Yeo-sam, a fixed-income analyst at Daewoo Securities, referring to the fact that a firmer won will help stabilise domestic inflation. The 1-year treasury bond yield added 1 basis point to 2.70 percent while the 5- and 10-year yields jumped by 7 basis points each to 4.44 percent and 4.96 percent, respectively . The June contract on 3-year treasury bond futures lost 6 ticks to 111.22, led by foreign sales totalling a net 2,407 contracts in addition to net sales of more than 4,000 contracts on Friday. The finance ministry's auction to sell 1.65 trillion won ($1.43 billion) worth of 5-year treasury bonds attracted bids for about three times the planned amount, but the average accepted yield was set at a high 4.43 percent. Trading was relatively cautious ahead of Wednesday's central bank policy meeting. Analysts expect the interest rate to be held steady again but traders are keen to hear the central bank governor's news conference for clues on future policy. close prev close 5-yr treasury bonds 4.44 pct 4.37 pct 3-yr treasury bonds 3.71 pct 3.69 pct 1-yr monetary stabilisation bonds 2.81 pct 2.77 pct 3-mth certificates of deposit 2.45 pct 2.45 pct Average call rate 2.01 pct ~ 6-mth *KORIBOR 2.59 pct 2.59 pct ~ not quoted * Korea interbank offered rate ($1=1155.3 Won) (Reporting by Yoo Choonsik; Editing by Jonathan Hopfner) ((choonsik.yoo@thomsonreuters.com; +82 2 3704 5580; Reuters Messaging: choonsik.yoo.reuters.com@reuters.net)) ((If you have a query or comment on this story, send an email to news.feedback.asia@thomsonreuters.com)) Keywords: MARKETS KOREA BONDS * Reuters Terminal users can see related statistics, contributions and news by double clicking on: Korea debt guide Corporate debt Korea equities Special debt Government debt Municipal debt Hanwha Securities-25 Samsung bond index-5 Korea primary market focus LATEST KOREAN FORECASTS GDP trade account inflation RELATED NEWS AND OTHER TOPICS All Korea news Interest rate news-Korea All debt news-Korea Korea summary New issues-Korea Korean won spot rate All Reuters debt news-4 (Multimedia versions of Reuters Top News are now available for: * 3000 Xtra : visit http://topnews.session.rservices.com * BridgeStation: view story .134 For more information on Top News, please visit http://topnews.reuters.com) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved.

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