The Bank of Korea has announced to keep the rates steady for even the consecutive second month. This announcement came as the South Korean Treasury bond market rallied today and it was found that the yields would be falling to a fresh 2010 lows.

Thus, the key policy rate remains the same at 2.25%, as announced by the central bank at its monetary policy meeting today. Since the market has been priced in a 25-basis point rate hike, therefore, this announcement, in turn surprised the market as well. Also, it has been the lowest yield since the year 2008, and has also reported the slowest producer-price inflation in the last five months.

These unchanged interest rates also pushed South Korea’s yield to a 19 month low. In Seoul, the Governor Kim Choong Soo said that now, price stability will be focused upon and also, the authorities will try and keep the economic growth sound, even though dark clouds of uncertainty are hovering over the global economic outlook.

Yum Sang Hoon, a Fixed-Income Analyst at SK Securities Co. in Seoul said, “We're seeing a massive impact on the bond market. That's the power of the central bank keeping rates unchanged”.