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(U1) Fades Off 2021 Highs


COVID & Supply Matter To Contend With


Holiday Observed

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  • The South Korean yield curve has twist steepened in the past month, the country grapples with a resurgence in coronavirus which threatens to dampen economic activity, but the BoK maintain their hawkish rhetoric and are optimistic on growth.
  • Fig.1: Korea Yield Curve Now v 1 Month

Source: Bloomberg

  • Bank of America expect a rate hike in October 2021: "Rising KRW rates have steepened $KRW forward curve. The strong BoK rhetoric following the July meeting resulted in KRW 1y1y NDIRS to sell-off 11bp as the market reprices the increased prospect of a faster BoK hiking cycle. Our economists maintain their call for the first BoK hike to materialize in October 2021. The strong sell-off in local rates also resulted in the front-end of the FX forward curve to steepen."
  • They add "we believe the BoK can turn further hawkish as we approach the next meeting on 26 August. Risks to the trade are a delay in the BoK hiking cycle, faster resolution to the US debt ceiling, and a widening of Korea cross-currency basis".