Korean rate markets continue to edge....>

KOREA RATES: Korean rate markets continue to edge lower in line with the

deterioration in risk appetite and still low oil pries despite the recent

bounce.

- The 2-year interest rate swap trades at 1.8325%, while the 10-year trades at

1.8575%, both own 1.75bps on the day. The yield curve remains inverted up to 8

years but the recent flattening has taken a pause. 

- The government's budget for next year was passed in parliament over the

weekend, with spending set to rise as the fastest pace in a decade. Expansionary

fiscal policy should put upside pressure on Korean inflation breakevens but with

real rates still in positive territory and the fiscal deficit expected to remain

at just 1.8% of GDP, there is little threat of an impact on rate markets.