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Korean Fixed Income & Currency (July 16 – July 20, 2018) |
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(Yield, Generic Government Bonds) 3y 2.077% (-0.028%) / 5y 2.315% (-0.026%) / 10y 2.522% (-0.034%) |
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USDKRW 1133.7 (+0.91%) |
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Comment |
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Against my expectation in last week, Korean stock market gone through huge volatility, and risk-aversion came up strongly. With KOSPI200 -0.57%, preferences towards safe-assets were showing their presences with overall drop of yields in government bonds. I believe that strengths in FI market weren’t based on weak stock market, but on the volatility in the risky assets. At July 18, KOSPI200 started at +0.78% but ended at -0.14%. During two days following July 18, KOSPI200 wasn’t showing specific directions. This volatility led to market participants’ attitude to FI market. With this, I still think that bear movements in FI market would be possible when KOSPI200 stop its volatile movement and start to show upside movement. I believe that preserved yield spread between 3y and 10y in 44-45bp level, is supporting my point. But considering investors’ trading appearance in FI market, the trend is too strong to perish soon. Let see the currency. While concerns for trade war between the two largest economies are being released in stock market, the concerns were continued in currency market. External factor we should focus on is that Chinese RMB is also going through bear market, awakening possibility of currency-war which could get tangled with trade-war. Weakness of industrial goods sector, which got the largest exposure to exports and is consisted of POSCO, LG Chemical, SKI, …, could be additional evidence for the point. I think that bear movement of KRW would be continued even if stock market enter into bull stage. |
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My opinions for this week are limited Bull in Korean Rate, and Bear in KRW. My bands for coming week are 3y Government bond 2.06 – 2.09 / 10y Government bond 2.49 – 2.54 / USDKRW 1,125 – 1,150 |
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Mr. Banker, http://markety.tistory.com |
Korean FI and Currency in Third week of July.pdf