Korea treasury bonds and bond futures slide, hurt by the U.S. Fed's move to buy more mortgage-backed bonds, diverting investor interest to riskier assets, participants say. However, they don't expect steeper declines from current levels following recent sharp losses; the three-year yield is +6 bps at 2.92%, while September bond futures fall 15 ticks to 105.82. "Though more money in the system isn't bad for both stocks and bonds, bonds can't help but feel rising inflationary pressure," looming over the longer-term, leading to higher yields, says a local bond manager. Following the BOK's rate-hold decision last week, expectations over two extra rate cuts within 2012 have vanished and players are now debating over whether one more cut (following July's 25-bp cut) will actually materialize, he adds.
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