Fixed Income & Currency
(yields, Generic Government Bonds) 3y 2.122% (-0.025%) / 5y 2.352% (-0.047%) / 10y 2.556% (-0.052%)
USDKRW 1114.5 (+0.64%)
Comment
The volatility in United States had been effected as positive factors even if KRW had shown its weakness against USD since mid-Jun.
Even though overall players were selling government bonds (net selling: domestic institutions KRW427.6bn, foreign investors KRW151bn), the situation is still good for foreigners considering that swap basis is still huge minus.
On the other hand, they had shown huge buying in Monetary Stabilization Bond Market, by buying KRW2262.9bn in total.
Also, in future markets, the foreigners were showing very positive view by buying KRW1221.3bn in 3y and KRW857.5bn in 10y.
The situation could support opinions of some traditional worries like that market participants are preparing huge volatilities which is expected to be realized with rises of Federal Fund Rate.
But it will be fine unless USDKRW skyrocket to 1200 which will be point of losing "attractive minus swap basis".
Korean FI market is still attractive for foreign investors who want relatively high yield compared with DM rates.
I think Korean Government & BOK securities have that status as long as USDKRW remains under 1200.
I think the highest volatility will release more or less in coming week, because the participants are already adapting to trade-war.
Earning momentum for multinational companies are still good and there are enough liquidities which are ready to buy adjusted markets.
My opinion is Bear-halt in Korean Rate, and Bull in KRW.
My bands for coming week are:
3y Government bond 2.11 - 2.16 / 10y Government bond 2.54 - 2.60 / USDKRW 1,090 - 1,120.