Rangebound Ahead Of BoK

Bond futures in South Korea are under pressure, 10-year future is down 7 ticks at 128.35, having bounced off contract lows around 128.76 yesterday, while the 3-year future is flat at 111.54.

• Earlier in the session data showed manufacturers business confidence rose to 85 in March from 81 previously. The confidence index for non-manufacturers for March rises to 73 from 70, 16.1% of respondents saw issues with domestic demand, up from 13% in last survey.
• The contracts have moved in a tight range since dropping at the open, retracing a portion of the jump seen into the close yesterday with dovish comments from BoK Governor Lee, the bank said it would step in to support bond markets if necessary, but only as a last resort.
• Elsewhere, new coronavirus cases picked up slightly again which could moderate downside. New cases in the past 24 hours were 440 compared to 357 yesterday. The latest rebound is attributable to the eased social distancing scheme that has been in place since last week after the Lunar New Year's holiday, which ran from Feb. 11 to 13. South Korea is currently preparing to start its vaccination programme which could also have caused people to relax their observance of rules. Health authorities say they will announce new guidelines for the following weeks no later than Saturday.
• It was confirmed by vice finance minister Hong yesterday that South Korea will submit the extra budget bill to parliament March 4 after discussing the issue at the March 2 Cabinet meeting. The size of the budget is expected to confirmed on Feb 28, indications are between KRW 12tn and KRW 20tn.
• Markets now look ahead to the BoK rate announcement tomorrow, no change is expected in policy settings but markets will scrutinise the statement for potential actions in bond markets.