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By Bloomberg

South Korean 10-year sovereign bonds rose, reversing an earlier drop, after Vice Finance Minister Bang Moon Kyu said a planned increase in sales to fund a supplementary budget won’t create a glut.

The local market will be able to absorb the additional issuance and the government will be flexible to minimize the impact, Yonhap Infomax reported Tuesday, citing the vice finance minister. The supplementary budget may range from 10 trillion won ($9.1 billion) to 25 trillion won, according to a Bloomberg News survey. Sovereign notes fell earlier on speculation the extra spending would lead to excess supply.

The yield on the bonds due June 2025 fell two basis points to close at 2.48 percent in Seoul after rising as high as 2.55 earlier, Korea Exchange prices show. The three-year yield climbed two basis points to 1.80 percent. The won weakened 0.5 percent to 1,104.70 a dollar, according to data compiled by Bloomberg.

“The market is reacting very sensitively to any news related to the extra budget,” said Yoon Yeo Sam, a Seoul-based fixed-income analyst at Daewoo Securities Co. “Trading volume was low today so the swing in yields was sharp.”

Finance Minister Choi Kyung Hwan said Monday that additional spending is needed because Middle East Respiratory Syndrome is having a “significant” impact on the economy, but declined to comment on the size of the package.