South Korea’s bonds completed a weekly loss, with the three-year yield touching a five-week high, and the won dropped on signs the U.S. will pare stimulus that has spurred fund flows to emerging markets.

Initial jobless claims in the world’s largest economy fell to the least in almost six years, official data showed this week, and 65 percent of economists surveyed by Bloomberg expect the Federal Reserve to reduce $85 billion of monthly bond buying in September. South Korean producer prices declined 0.9 percent in July from a year earlier after a 1.4 percent drop in June, the central bank said in a statement today.

“Speculation that Fed tapering will start soon is gaining momentum,” Dong-jin Park, a fixed-income analyst at Samsung Futures Inc. in Seoul, wrote in a research note today. “The U.S. economic data come out mostly better than forecast.”

The yield on the 2.75 percent sovereign bonds due June 2016 increased seven basis points this week to 2.98 percent in Seoul, according to Korea Exchange Inc. prices. It was steady today and touched 3 percent earlier, the highest since July 9.

Net capital outflows reached $31 billion in the first half and, if they continue at the same pace for the rest of the year, will beat 2008’s record of $43 billion, Kwon Young Sun, a Hong Kong-based economist at Nomura Holdings Inc., wrote in a research note yesterday. The outflows are being driven by local rather than foreign investors, he wrote.

The won fell 0.1 percent this week to 1,113.59 per dollar, according to data compiled by Bloomberg. The currency climbed 0.5 percent from Aug. 14. South Korean financial markets were closed yesterday for a public holiday.

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, increased one basis point this week to 6.86 percent. It dropped 14 basis points today. (Bloomberg)