Korea Bond Market Daily Report(Gemini): 11/29/2024
Korea Bond Market Daily Report
Treasury yields
| Treasury yields | Recent | DoD (bp) | YTD (bp) | YoY (bp) |
|---|---|---|---|---|
| 3Y KTB | 2.64% | ▼ 10.3 | ▼ 60.2 | ▼ 101.0 |
| 10Y KTB | 2.79% | ▼ 9.2 | ▼ 51.8 | ▼ 93.8 |
| Term Spread(bp) | 15 | ▲ 1.1 | ▲ 8.4 | ▲ 7.2 |
| Corp. AA- 3Y | 3.22% | ▼ 9.6 | ▼ 76.0 | ▼ 117.7 |
| Credit spread(bp) | 58.2 | ▲ 0.7 | ▼ 15.8 | ▼ 16.7 |
US Treasury Yields
| US Treasury Yields | Recent | DoD (bp) | YTD (bp) | YoY (bp) |
|---|---|---|---|---|
| 2Y US Treasury | 4.25% | ▲ 4.2 | ▼ 7.8 | ▼ 47.8 |
| 10Y US Treasury | 4.30% | ▼ 0.2 | ▲ 34.8 | ▼ 4.2 |
| Term Spread(bp) | 4.6 | ▼ 4.4 | ▲ 42.6 | ▲ 43.6 |
[Market Trends].
The U.S. bond market was closed for Thanksgiving. Following the Bank of Korea's announcement of a rate cut, we saw a sharp drop in interest rates in the domestic bond market, especially for the 3-year and 10-year government bonds.
Market experts expect the downward trend in domestic interest rates to continue for the foreseeable future in light of successive rate cuts by the Monetary Policy Committee and downward revisions to economic growth forecasts, and some suggest a strategy of increasing the duration of KRW bonds at the beginning of the year.
[Top economic news and events].
Top U.S. News
The US bond market was closed for the Thanksgiving holiday, so there were no changes to US bond rates.
Since the U.S. presidential election, the election of Donald Trump has created uncertainty about U.S. economic policy, raising concerns about the impact on international financial markets.
Featured News
On November 28, 2024, the Monetary Policy Committee of the Bank of Korea cut the benchmark interest rate by 25 basis points from 3.25% to 3.00%. This is the second consecutive rate cut since October and is intended to stimulate the economy and domestic demand. The Monetary Policy Committee left open the possibility of another rate cut in the next three months. The economic growth forecast for next year was lowered to 1.9% from 2.1%.
The BOK's decision to cut the benchmark interest rate and the downward revision of next year's economic growth forecast led to a sharp drop in domestic interest rates. The 3-year government bond fell 2.64% (-10.3 basis points) and the 10-year bond fell 2.79% (-9.2 basis points). The won/dollar exchange rate rose to 1,394.5 won (+1.70 won). The market is interpreting this as a dovish signal.
Other News and Events
Choi Sang-mok, the deputy prime minister, attributed the exchange rate appreciation to a stronger dollar rather than a weaker won, emphasizing that the South Korean economy is not in crisis.
RBA Governor Michele Bullock said the bank is prepared for global uncertainty, but the current high level of inflation makes it difficult to cut rates anytime soon. She estimated that the inflation target will be met in 2026.
[Response Strategy].
While we do not view the current economic situation as a crisis, we are open to the possibility of further rate cuts as concerns about slowing growth grow. While closely monitoring market conditions, you should be flexible in adjusting your investment strategy, especially considering a strategy of increasing the duration of your KRW bonds at the beginning of the year. The timing and extent of future rate cuts are expected to be influenced by the pace of monetary policy by the US Federal Reserve.
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-11-29-2024/
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