Weak Auction Spurs Sell-Off

The fixed income space in South Korea had seen a bid as sentiment spilled over from firmer Aussie bonds in the wake of data and a speech from RBA's Lowe, which had in turn impacted the US treasury space.

• After ticking up to highs of 129.54 the 10-year future dropped sharply after a weak 50-year auction. Some yield concession seen along with weaker cover as markets still harbour jitters over the additional budget and cash handouts. Last up 1 tick at 129.34. Some bull steepeners on the cash curve.
• Foreigners were net buyers of South Korean bonds again yesterday, in 2021 so far there have only been four days of outflows. Tuesday saw outsized purchases of $2.032bn, the biggest single day purchase since 2015, with one buyer accounting for $2bn. This has caused speculation around who the buyer was, with hot money currently on foreign investors reinvesting maturing short term funds, or a central bank active in longer term tenors.