Futures Rangebound; BoK Sells 2-Year Paper

Korean bond futures seeing rangebound trade after opening in negative territory, 10-year future last down 13 ticks at 129.43.

• The Bank of Korea sold KRW 2.4tn of 2-year paper. The sale drew a yield of 0.87% and was covered 1.48x. Cash yields have declined marginally across the curve, the belly underperfoming early on.
• The MOF announced in October 2020 it would begin selling 2-year bonds in 2021 "to ease the burdens on mid- and long-maturity Treasury bonds and set a stable yield for short-maturity bonds," said Vice Finance Minister An Il-whan. The first sale of the tenor will come next week.
• Participants will look ahead to a 50-year auction later this week. South Korea has set the debt issue ceiling for this year at a fresh high of KRW 176.4 trillion in line with a record-high KRW 558 trillion budget for 2021. Net increase will be KRW 113.2 trillion.
• Bond market focus for the next few weeks will be on government discussions over a proposed extra budget and cash handouts to citizens and businesses. The BOK are expected to announce the size, tenors and dates of bond purchases once the extra budget has been finalised.
• The KOSPI is higher which has detracted from safer assets. Equity gains are boosted by a positive lead from the US and earnings in the region. SK Telecom reported revenue and profits in its Q4 earnings report. Foreigners were buyers of local equities again yesterday, bringing net purchases this week to around $570m.