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(Seoul=Yonhap Infomax) Hyun Woo Roh – South Korean government bond yields edged up in morning trade on the 20th, tracking gains in US Treasury yields and heavy foreign selling in KTB futures.
However, bargain-hunting during the session helped pare earlier losses, as improved sentiment in the credit market supported a partial recovery.
According to the Seoul bond market, as of 11:07 AM KST, the yield on the benchmark 3-year government bond rose 0.8 basis points from the previous session’s market average to 2.878%. The 10-year yield was up 0.3 basis points at 3.285%.
Three-year KTB futures slipped 2 ticks to 105.89, with foreigners net selling around 6,000 contracts and securities firms net buying a similar amount. Ten-year KTB futures fell 3 ticks to 114.20, as foreigners net sold about 2,000 contracts while securities firms bought roughly 600 contracts. The 30-year KTB futures gained 0.10 points to 133.74 on a volume of 27 contracts.
Afternoon Outlook
Market participants expect the recovery trend to continue. A bond dealer at a securities firm said, “Credit spreads are tightening and overall sentiment is improving. Despite a heavy issuance schedule today, the market absorbed supply quickly.”
He added, “Even with foreign selling in KTB futures, yields are holding steady, suggesting further downside is limited.”
A bond manager at an asset management company noted, “Since yesterday, the credit market has been gradually recovering. If foreign buying returns to KTB futures, the market could strengthen further.”
Intraday Trends
The 3-year benchmark KTB (issue 25-4) opened at 2.887%, up 1.7 basis points from the previous session’s market average. The 10-year benchmark KTB (issue 25-5) started at 3.291%, up 0.9 basis points.
Overnight, US Treasury yields rose, with the 2-year up 1.90 basis points and the 10-year up 2.50 basis points. The Seoul bond market opened weaker, while the KOSPI surged as Nvidia’s earnings beat expectations, fueling risk appetite.
Foreign investors initially bought KTB futures but switched to net selling as the session progressed. News that China’s central bank kept its benchmark lending rates unchanged had little impact, as it was in line with market expectations. The People’s Bank of China (PBOC) maintained the 1-year Loan Prime Rate (LPR) at 3.0% and the 5-year LPR, a key mortgage reference, at 3.5%.
In Asian trading, both Australian and US Treasury yields climbed. As of 11:01 AM KST, the US 2-year yield was up 1.9 basis points and the 10-year up 0.7 basis points. Australian 2-year and 10-year yields rose 5.34 and 5.48 basis points, respectively.
Foreigners net sold about 6,100 contracts in 3-year KTB futures and 2,000 contracts in 10-year KTB futures. Trading volume in 3-year KTB futures reached 60,000 contracts, with open interest down by 6,100. Ten-year KTB futures saw 36,000 contracts traded, with open interest down by 265.
hwroh3@yna.co.kr
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