Free Trial

SOUTH KOREA: BOK and the Outlook for Rates.

SOUTH KOREA
  • The BOK’s Governor Rhee said during an interview in Washington at the IMF / World Bank meetings last week that ‘the Bank of Korea will likely revisit its economic growth forecasts next month with risks tilting to the downside.” (source BBG).
  • Rhee also noted that “the exchange rate has become a factor to consider in the BOK’s monetary policy and that the current dollar exchange rate is higher than desirable and increasing at a fast pace.” (source BBG).
  • Equally, South Korean President Yoon was quoted as saying “It’s important to respond promptly to prevent changes in supply chains, oil prices and FX from having a negative impact on (the) local economy.” (source BBG)
  • Recent trading sessions has seen bond yields globally react to US yields and their move higher.
  • Having touched 2.785% in mid-October, the KTB 2yr at 2.952%, is almost 17bps higher.
  • Similarly, the yield on the KTB 10 year has moved higher, increasing to 3.11% from the October lows.
  • Using BBG’s MIPR function, we can see that the market implied rate in six months’ time is 2.87% for monetary policy, a reduction of 38bps from the current base rate of 3.25%.
  • Whist Korean yields’ correlation to US has always been high and is likely to remain so, there is still room for the front end of KTB rates to possibly react to any revisiting to the outlook for Korean growth. 
229 words

To read the full story

Close

Why MNI

MNI is the leading provider

of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.

Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
  • The BOK’s Governor Rhee said during an interview in Washington at the IMF / World Bank meetings last week that ‘the Bank of Korea will likely revisit its economic growth forecasts next month with risks tilting to the downside.” (source BBG).
  • Rhee also noted that “the exchange rate has become a factor to consider in the BOK’s monetary policy and that the current dollar exchange rate is higher than desirable and increasing at a fast pace.” (source BBG).
  • Equally, South Korean President Yoon was quoted as saying “It’s important to respond promptly to prevent changes in supply chains, oil prices and FX from having a negative impact on (the) local economy.” (source BBG)
  • Recent trading sessions has seen bond yields globally react to US yields and their move higher.
  • Having touched 2.785% in mid-October, the KTB 2yr at 2.952%, is almost 17bps higher.
  • Similarly, the yield on the KTB 10 year has moved higher, increasing to 3.11% from the October lows.
  • Using BBG’s MIPR function, we can see that the market implied rate in six months’ time is 2.87% for monetary policy, a reduction of 38bps from the current base rate of 3.25%.
  • Whist Korean yields’ correlation to US has always been high and is likely to remain so, there is still room for the front end of KTB rates to possibly react to any revisiting to the outlook for Korean growth.