Bond Space Heavy On Issuance Concerns

The fixed income space in South Korea has come under pressure on concerns that additional bond sales will be required to finance the touted additional budget that will feature handouts to citizens and businesses.

• Purchases of South Korean bonds by foreigners fell sharply yesterday, falling $1.45bn to $585m. Purchases have been strong in 2021 so far, totalling $6.17bn so far in 2021. But foreign demand is anything but certain, and heavy selling was seen at several points last year.
• Also under scrutiny will be the BoK's conversion offers. The bank will conduct purchases of 30-year paper to the tune of KRW 300bn in February (operation data Feb 17), after purchasing KRW 200bn of 30-year and KRW 100bn of inflation linked paper in January. In September the bank launched a bond purchase program worth KRW 5tn, its biggest in nine years, in order to ease some of the oversupply from increased debt isues that would be needed to finance the budget deficit. Late last year BOK Governor Lee Ju-yeol said the central bank was ready to buy treasury notes anytime to keep the markets stable, but there is no guarantee the BoK will increase purchases.
• South Korea 10-year bond future down 25 ticks on the day at 129.31, bouncing off resistance at 129.20. Market prepares for 50-year supply tomorrow.