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BOK:  Forward Expectations for Cuts Remain Modest. 

BOK
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  • The BOK meeting today sees modest expectations for cuts priced in.
  • Comparing prices back to 18 February (just prior to weak consumer confidence and early export data), market pricing shows that forwards have moved lower than current.
  • On a one-month forward horizon, only 17% of a 25 bp cut is priced in.
  • A full rate cut is not priced in until six months.
  • Market expectations from the bond market have richened since the consumer confidence and exports, with the KTB 3Yr 1bp lower in yield and the KTB 10YR  7bps lower.
  • Market forecasters are unanimous in their expectation for cuts, though we still forecast the BOK to be on hold citing distortions from Lunar New Year impacting recent data, a BOK Governor pushing the onus onto the Government for a fiscal solution to slowing growth and the volatility in the currency subsiding. 

 

Figure 1: 3M Swap Rate Today vs 18 February. 

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  • The BOK meeting today sees modest expectations for cuts priced in.
  • Comparing prices back to 18 February (just prior to weak consumer confidence and early export data), market pricing shows that forwards have moved lower than current.
  • On a one-month forward horizon, only 17% of a 25 bp cut is priced in.
  • A full rate cut is not priced in until six months.
  • Market expectations from the bond market have richened since the consumer confidence and exports, with the KTB 3Yr 1bp lower in yield and the KTB 10YR  7bps lower.
  • Market forecasters are unanimous in their expectation for cuts, though we still forecast the BOK to be on hold citing distortions from Lunar New Year impacting recent data, a BOK Governor pushing the onus onto the Government for a fiscal solution to slowing growth and the volatility in the currency subsiding. 

 

Figure 1: 3M Swap Rate Today vs 18 February. 

Keep reading...Show less