Korea Bond Market Daily Report(Gemini): 2/14/2025
Korea Bond Market Daily Report
Treasury yields
| Treasury yields | Recent | DoD (bp) | YTD (bp) | YoY (bp) |
|---|---|---|---|---|
| 3Y KTB | 2.63% | ▼ 2.0 | ▲ 12.4 | ▼ 72.2 |
| 10Y KTB | 2.87% | ▼ 0.7 | ▲ 12.3 | ▼ 58.1 |
| Term Spread(bp) | 24.1 | ▲ 1.3 | ▼ 0.1 | ▲ 14.1 |
| Corp. AA- 3Y | 3.23% | ▼ 1.1 | ▲ 3.0 | ▼ 84.7 |
| Credit spread(bp) | 59.6 | ▲ 0.9 | ▼ 9.4 | ▼ 12.5 |
US Treasury Yields
| US Treasury Yields | Recent | DoD (bp) | YTD (bp) | YoY (bp) |
|---|---|---|---|---|
| 2Y US Treasury | 4.36% | ▼ 0.3 | ▲ 10.7 | ▼ 28.3 |
| 10Y US Treasury | 4.63% | ▲ 0.5 | ▲ 5.5 | ▲ 31.5 |
| Term Spread(bp) | 26.8 | ▲ 0.8 | ▼ 5.2 | ▲ 59.8 |
[Market Trends].
January's US PPI data showed a general slowdown in healthcare and airfare, which both contribute to PCE inflation. Despite a weak bid for the 30-year US Treasury note, the possibility of a reciprocal tariff deal and positive PPI details drove Treasury rates lower.
The spread between the 3-year and 10-year Treasury bonds is showing signs of steepening again, with the spread below 20 basis points. This year's less volatile market conditions require trading strategies that take into account interest rate levels and the top and bottom of the yield curve.
[Top economic news and events].
Top U.S. News
The US PPI index for January was released, beating market expectations. Higher food prices, including eggs, and energy prices drove headline inflation, but the underlying PCE inflation forecast was revised downward as prices for some service items included in PCE inflation fell.
Despite former President Trump's signing of the reciprocal tariff executive order, CNBC reported that reciprocal tariffs could be delayed until April, which could be a positive sign for the market.
Featured News
The opposition's 35 trillion won supplementary budget proposal is official. 24 trillion won will be allocated to livelihood recovery and 11 trillion won to economic growth. Depending on whether the supplementary budget is passed by the National Assembly and the government's response, the direction of future economic policies and market reactions are expected to vary.
Domestic interest rates have been driven lower by increased bargain-hunting by domestic institutions ahead of the February meeting of the Monetary Policy Committee. With foreigners continuing to be net sellers of government bond futures, the movements of domestic institutional investors are becoming increasingly influential in the market. The market may become more volatile depending on the Monetary Policy Committee's interest rate decision.
Other News and Events
The U.S. is considering eliminating tariffs on cars and pharmaceuticals because of the high share of imports of pharmaceuticals and medical products and new cars based on PCE. This decision will have important implications for the U.S. economy and international trade relations.
As of February 14, the Fed's total balance sheet increased by $2.6 billion week-over-week to $6.813 trillion, the first increase in five weeks, and QE (quantitative tightening) has been paused. Short-term money markets remain stable.
[Response Strategy].
Given the high level of market uncertainty, a prudent investment strategy is required. You should closely monitor economic indicators in the U.S. and South Korea, and strengthen your risk management for interest rate fluctuations and currency fluctuations. It's also important to continue to monitor domestic and international political and economic events to ensure your strategy is flexible enough to respond to market changes.
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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