Korea Bond Market Daily Report(Gemini): 1/21/2025
Korea Bond Market Daily Report
Treasury yields
| Treasury yields | Recent | DoD (bp) | YTD (bp) | YoY (bp) |
|---|---|---|---|---|
| 3Y KTB | 2.62% | ▲ 3.5 | ▲ 11.6 | ▼ 68.4 |
| 10Y KTB | 2.87% | ▲ 5.5 | ▲ 11.9 | ▼ 55.4 |
| Term Spread(bp) | 24.5 | ▲ 2.0 | ▲ 0.3 | ▲ 13.0 |
| Corp. AA- 3Y | 3.27% | ▲ 2.7 | ▲ 7.1 | ▼ 79.0 |
| Credit spread(bp) | 64.5 | ▼ 0.8 | ▼ 4.5 | ▼ 10.6 |
US Treasury Yields
| US Treasury Yields | Recent | DoD (bp) | YTD (bp) | YoY (bp) |
|---|---|---|---|---|
| 2Y US Treasury | 4.28% | ▲ 5.3 | ▲ 3.3 | ▼ 10.7 |
| 10Y US Treasury | 4.62% | ▲ 1.3 | ▲ 5.3 | ▲ 47.3 |
| Term Spread(bp) | 34 | ▼ 4.0 | ▲ 2.0 | ▲ 58.0 |
[Market Trends].
U.S. bond markets closed and domestic rates rise: With U.S. bond markets closed for Martin Luther King Day, domestic interest rates rose due to caution over Trump's inauguration and strong bidding for the 10-year Treasury note. Changes in domestic and international interest rate differentials and shifts in investor sentiment should be carefully monitored, as they will be important market variables in predicting the future direction of interest rates and formulating investment strategies.
Comparison with historical patterns: An analysis of bond market patterns over the past decade shows that the pattern of increases and decreases in the fourth quarter versus the following January has been tight, with little variation. However, the first quarter of this year versus the fourth quarter of last year saw unexpected market behavior, with the largest increase in borrowing in the past 11 years. This illustrates the limitations of relying on historical patterns, and suggests the difficulty of predicting future markets.
[Top economic news and events].
Top U.S. News
President Trump's inauguration and policy announcements: With the inauguration of President Trump, policies such as fighting inflation, declaring a national energy emergency, and rolling back the electric vehicle mandate have been announced. These will have a significant impact on the U.S. economy and international markets, and it is important to closely analyze and respond to the short- and long-term economic impact of each policy. The potential for increased protectionism, including the potential for tariffs, should also be closely monitored.
WSJ report and dollar index drops: The dollar index fell sharply following a report in the Wall Street Journal (WSJ) that President Trump will not impose tariffs on his first day in office. This is a move that was not in line with market expectations and could be interpreted as a reflection of uncertainty about the direction of the Trump administration's economic policies. The future direction of US economic policy and the market's reaction will need to be closely monitored.
Featured News
Bank of Korea announces key interest rate freeze and lowered growth forecast (to 1.6-1.7%): Along with the decision to keep interest rates unchanged, the Bank of Korea revised down its forecast for real gross domestic product (GDP) growth this year to 1.6-1.7% from 1.9%, reflecting concerns about weak exports and slowing domestic demand. There is growing uncertainty about the outlook for future economic growth, and there are mixed expectations and concerns about the effectiveness of the government's stimulus program. These developments are likely to impact the domestic bond market and cause interest rate volatility.
The Bank of Korea released its January Economic Situation Assessment: The Bank of Korea projected that growth in the fourth quarter of last year will be significantly below its previous forecast, citing slowing export growth, weak consumption and construction investment. This year's growth forecast was also revised downward to 1.6-1.7%, with political uncertainty and a slowdown in construction cited as the main negative factors. Despite the government's policy efforts, including early budget execution, the recovery is considered to be slow. This is expected to have important implications for future economic policy direction and corporate investment decisions.
Other News and Events
Trump's inauguration and policy announcements: The inauguration of President Donald Trump has brought with it a number of policy announcements, including tackling inflation, declaring an energy emergency, and rolling back electric vehicle mandates. These policies are expected to have a significant impact on international financial markets and the domestic economy, and will require careful analysis of their market impact and spillover effects. In particular, tariffs are an area to watch closely as they could have a direct impact on international trade and investment.
Key price moves on Trump's inauguration day and WSJ coverage: On the day of Trump's inauguration, the 10-year U.S. Treasury rate fell and the S&P 500 rose. The dollar index fell sharply after the WSJ reported that President Trump would not impose tariffs on his first day. Strategies for managing the market impact and uncertainty of changing trade relations with the US have become critical. It's important to anticipate the impact on the domestic economy and have a strategy in place to respond.
[Response Strategy].
Adjust your portfolio strategy in anticipation of increased market volatility: Current market conditions are highly volatile and uncertainty is growing. Therefore, a prudent investment strategy is required, and you should consider adjusting the duration of your portfolio to a neutral level, although you do not need to increase it sharply. Strengthen your monitoring of various policy and market changes, and prioritize risk management. Regular portfolio reviews should be conducted to build a strategy that is flexible enough to respond to market changes. In addition, an integrated investment strategy should be developed that takes into account the interconnectedness of the U.S. and Korean markets.
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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