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South Korean bond futures fall on fears of a ‘big’ rate hike

Incheon city skyline is pictured in an early morning aerial photo south of Seoul, South Korea, on January 21, 2018. REUTERS/ Fabrizio Bensch

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SEOUL, May 16 (Reuters) – South Korea’s government bond futures plunged early Monday after the central bank governor kept the door open for a larger-than-usual rate hike in the coming months to fight inflation.

The June contract on the most liquid three-year Treasury bond futures fell as much as 43 ticks before paring losses slightly to trade 37 ticks lower at 105.23 at 0020 GMT.

“(I might be able to say that) after seeing the policy meeting in May and more data around July and August,” Bank of Korea Governor Rhee Chang-yong said when asked by reporters if the Bank to consider a 50 basis point rate hike at its May 26 meeting.

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The South Korean central bank typically raises or lowers its benchmark interest rate in 25 basis point increments.

In their first face-to-face meeting since taking office this month, Rhee and Finance Minister Choo Kyung-ho agreed to step up policy coordination to tackle inflation and financial market volatility, the top current risks to the economy.

They also agreed that downside risks to growth in Asia’s fourth-largest economy had increased, added a joint statement by the two organizations.

The country’s two most powerful economic policymakers held their first in-person meeting on Monday after taking office this month, following their participation in a meeting on Friday hosted by President Yoon Suk-yeol.

The statement contained no further comments on specific asset classes or indicators.

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Reporting by Choonsik Yoo and Seunggyu Lim; Editing by Sam Holmes

Our standards: The Thomson Reuters Trust Principles.

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