Asia Rates: Korean Yields Higher With US Tsys, CH-US Spread Widens

South Korean Sovereign Bonds are sharply cheaper, with benchmark yields 6-10bps higher, ahead of tomorrow’s BoK Policy Decision. The local market was closed yesterday for the general assembly elections.

• The strong consensus is for no change in the policy rate at tomorrow's BoK meeting. None of the economists surveyed by Bloomberg are forecasting a shift, with the policy rate currently at 3.50%. This is also our strong bias. (See MNI Preview here)
• The local market is currently processing yesterday's movements in US tsys in response to the hotter-than-anticipated US CPI data. Despite a slight recovery during the Asia-Pac session, this influence continues to resonate. Looking forward, the US economic calendar features the release of PPI and Jobless Claims data later today.
• Contrary to the global bond downturn, China Government Bonds have exhibited resilience, with benchmark yields displaying a twist-steepening ranging from -0.7bp to +2bps.
• The significant surge of over 20bps in the US 2-year yield observed yesterday has consequently widened the yield differential with its Chinese counterparts to over 300bps. This surpasses the previous peak recorded in late August and marks levels not seen since 2006.
• This development is likely to draw further attention to the recent rally in the local bond market, especially in light of recent statements from the PBoC regarding the monitoring of long-term interest rates amidst the economic growth rebound.