BOfA: Receiving Front End Vs. Paying The Belly Looks Attractive

Bank of America note that the combination of "the BoK's hawkish stance on addressing financial stability concerns and the early start to its rate hiking cycle has led front-end rates to be higher than most of Korea's regional and global peers. Combined with the global sell-off in front-end rates, we think this has pushed front-end Korean rates to an excessively high level. However, the sell-off in the front-end has not resulted in a commensurate rise in the belly and the back-end, resulting in an inverted profile on the forward curve. In a world of global inflation concerns, we think a rates profile which prices in a front-loading of BoK hikes is unrealistic and the market is currently overly bullish on the belly of the KRW curve. Current carry/roll cost is also supportive of receiving front-end and paying the belly."