Korean Fixed Income & Currency (July 23 – July 27, 2018)

(Yield, Generic Government Bonds)

3y 2.112% (+0.035%) / 5y 2.359% (+0.043%) / 10y 2.571% (+0.049%)

USDKRW 1,118.1 (-1.38%)

Comment

I should have preserved my opinion. The rate and currency were going in exact reversed direction from what I expect. KOSPI200 had been showing the halt with +0.28%, but investors shown positive reaction in stock market with foreigners’ net buying +KRW172bn, domestic institutions’ +KRW712bn.

With the movements, Korean Government bonds were showing weakness, following global market. The most dramatic event in global market during a week was Japanese one, with signal of ending QE of BOJ. At July 23, yield of Japanese 10y government bond rise by 0.051%. But looks like Korean FI market didn’t get a big impact from it. The numbers of rise weren’t that big against DM markets.

There are some signals for outflow of foreigners in FI market, even though foreigners were entering into the market continuously with net buying +KRW1tn during a week. Swap basis are decreasing fast. At July 2, Swap basis in 2y was -0.748, but at July 27, it was -0.678. the numbers are decreasing in every maturity. It’s still fine, but we need to see the numbers. Foreigners sold KRW623bn in 10y future during a week.

I guess that impact of expectation for delay of rises in Federal Fund Rate, with US GDP growth 4.1% will be limited considering movement of US T-Note 10y future.

About KRW, limited strength of USD is worked as favorable to the currency. Unlike what I thought, 95 is limitation for dollar index which was moving 94~95 continuously. The direction during a next week will be decided at Monday, considering NASDAQ which recorded -1.46% at July 27, But I expect overall strong KOSPI and KRW.

My opinions for this week are Bear in Korean Rate, and Bull in KRW.

My bands for coming week are

3y Government bond 2.09 – 2.14 / 10y Government bond 2.54 – 2.60 / USDKRW 1,100 – 1,125

Mr. Banker, http://markety.tistory.com


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