S.Korea bond futures tumble as central bank mulls rate hike

The city skyline of Incheon is pictured early in the morning in an aerial view south of Seoul, South Korea.

SEOUL Reuters -- South Korea's government bond futures plunged early on Monday, after the central bank chief kept the door open for a bigger interest rate increase than usual in the coming months to fight inflation.

The June contract on most liquid three-year treasury bond futures fell by 43 ticks before trading 37 ticks lower at 105.23 at 0020 GMT.

I may be able to say something after watching the May policy meeting and more data by around July and August, Bank of Korea Governor Rhee Chang-yong said when asked by reporters if the bank was considering a 50 basis-point inters hike at its May 26 meeting.

South Korea's central bank usually raises or cuts its benchmark interest rate in 25 basis point increments.

At their first one-on-one meeting since taking office this month, Rhee and Finance Minister Choo Kyung-ho agreed to improve policy coordination in order to fight inflation and financial markets instability, the biggest current risks facing the economy.

The two organisations agreed that downside risks to growth in Asia's fourth largest economy had increased, according to a joint statement from the two organisations.

The country's two most powerful economic policymakers held their first one-on-one meeting on Monday after taking office this month, and in a follow-up to their attendance at a meeting on Friday hosted by President Yoon Suk-yeol.

The statement did not disclose any further comments on specific asset classes or indicators.