Korea Bond Market Daily Report(Gemini): 10/8/2024
Korea Bond Market Daily Report
Treasury yields
| Treasury yields | Recent | DoD (bp) | YTD (bp) | YoY (bp) |
|---|---|---|---|---|
| 3Y KTB | 2.96% | ▲ 13.6 | ▼ 28.0 | ▼ 105.5 |
| 10Y KTB | 3.10% | ▲ 10.5 | ▼ 20.5 | ▼ 113.9 |
| Term Spread(bp) | 14.1 | ▼ 3.1 | ▲ 7.5 | ▼ 8.4 |
| Corp. AA- 3Y | 3.55% | ▲ 13.1 | ▼ 43.4 | ▼ 125.0 |
| Credit spread(bp) | 58.6 | ▼ 0.5 | ▼ 15.4 | ▼ 19.5 |
US Treasury Yields
| US Treasury Yields | Recent | DoD (bp) | YTD (bp) | YoY (bp) |
|---|---|---|---|---|
| 2Y US Treasury | 4.00% | ▲ 6.5 | ▼ 33.5 | ▼ 108.5 |
| 10Y US Treasury | 4.03% | ▲ 4.8 | ▲ 7.8 | ▼ 75.2 |
| Term Spread(bp) | 3.3 | ▼ 1.7 | ▲ 41.3 | ▲ 33.3 |
[Market Trends].
Surprising U.S. employment data and rising oil prices have raised the possibility of a November rate hike, pushing the 10-year U.S. Treasury yield above 4%.
Domestic rates surged on the back of the US employment surprise and massive net selling of foreign Treasury futures: – US 10Y 4.03% (+5.8bp), US 2Y 4.00% (+7.4bp), US 10Y-2Y long/short yield differential +3.0bp (-1.5bp), Treasury 3Y 2.96% (+13.6bp), Treasury 10Y 3.10% (+10.5bp), Treasury 30Y 2.94% (+8.1bp), Treasury 10Y-3Y spread +14.1bp (-3.1bp), Treasury 30Y-10Y spread -15.9bp (-2.4bp), KRW/dollar exchange rate 1,344.5 won (-4.8 won)
[Top economic news and events].
Top U.S. News
US employment data surprised to the upside, with nonfarm payrolls rising by 25.4k m/m in September. The unemployment rate came in at 4.1%, below the previous month and expectations. Treasury yields opened weaker on the back of strong US employment.
Minneapolis President Neil Kasichari noted that U.S. employment remains strong, but the balance of risks has shifted from high inflation to high unemployment. According to CME FedWatch, the probability of the Fed cutting rates by 25 basis points in November is 86.3% and the probability of a hike is 13.7%, up sharply from 4.4% the previous trading day.
Featured News
By the end of September, household loan balances at the five largest banks increased by $5.6 trillion month-on-month. Over the course of two business days, the increase was $1.4 trillion, and when adjusted for the number of business days in August, the increase in household loan balances in September is estimated to have been $6.5 trillion.
The 10-year Treasury touched 3.10% intraday, with the 3-year Treasury also above 2.95%. These are the levels we outlined in our “Recession Trade”↩ in early August (we've since provided more detailed levels in our “In-Depth Recap”↩), and we're getting a lot of questions about further rate hike fears amid today's stimulus news from China.
Other News and Events
SOFR open interest has plummeted. The average SOFR rate fell to 4.83% and the 75th percentile rate fell to 4.89%, below the IORB of 4.9%.
Brent crude surged to $81 per barrel, its highest level since August. The narrative that prevailed through Q3 that there were no short commodities to be found other than at a price, quickly shifted in Q4 to a narrative that there were no long commodities to be found other than at an attractive price.
[Response Strategy].
Maintain the strategy of reducing Treasury duration and overweighting credit.
Disclaimer The information contained in this report has been obtained from sources believed to be reliable, but we do not guarantee its accuracy or completeness. This report is for informational purposes only and is not a solicitation or offer to buy or sell any security or financial instrument. Opinions expressed in this report are subject to change without notice. Investment decisions are the sole responsibility of the investor and you should seek professional advice as needed
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Original Post: https://aicraft.life/korea-bond-market-daily-reportgemini-10-8-2024/
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