BoK To Reduce 2-Year MSB Issuance

10-Year future is lower, hugging a narrow range after gapping lower at the open playing catch up with US tsys. Some twist steepening seen on the cash curve ahead of the 20-Year auction later today.

• There were reports earlier that the BoK plans to reduce 2-Year MSB (monetary stabilization bond) issuance by around KRW 2tn to KRW 3.5tn, and will instead adopt a 3-Year MSB for around KRW 1.3tn a month. 3-Year futures have proven more resilient than longer dated counterparts, last up 3 ticks at 110.21.
• Elsewhere a lawmaker from the ruling Democratic Party has said that the size of the second extra budget could be between KRW 33tn – KRW 35tn. It was reported last week that the government plans the second budget without extra bond issuance, some of the budget would be repaid with excess tax revenue.
• Meanwhile the central bank has fallen back on a familiar refrain, warnings that deepening fiscal imbalances caused by excessive borrowing and potential asset bubbles are a threat to the economy. In its semi-annual financial stability report that bank said imbalances could impact the economy negatively if there's a shock triggering a correction in the asset market and a rapid deleveraging of debt.