(Seoul=Yonhap Infomax) As of the 21st, the Seoul bond market is expected to fluctuate in line with foreign investor activity, with a close eye on the ongoing recovery in investor sentiment.


On the previous day, there was a surge in issuance of short-term special bank bonds and certificates of deposit (CDs) with maturities under two years. These were quickly absorbed by the market, reinforcing the perception that investor sentiment in the short-term credit market is rebounding.


With year-end approaching, expectations are rising for capital deployment from sources such as retirement pension funds. The key question is whether this sense of relief will spread across the broader credit market.


However, foreign selling in the government bond futures market remains a significant variable. On the previous day, foreign investors were net sellers of over 22,000 contracts of three-year government bond futures—the largest volume since October 23, when they sold 27,114 contracts.


This trend appears to have been influenced by rising government bond yields in major Asian markets and a weekly real estate price index from Korea Real Estate Board showing a renewed acceleration in Seoul home prices after a month-long pause.


Notably, this weekly index was the last available before next week's November Monetary Policy Board meeting, suggesting that foreign investors may be positioning ahead of the rate decision.


Additionally, the dollar-won exchange rate climbed above the 1,470 won level during intraday trading, sending another unfavorable signal ahead of the November policy meeting.


Overnight, the US Treasury market saw renewed expectations for a rate cut at the December Federal Open Market Committee (FOMC) meeting, as the US unemployment rate for September rose to a four-year high.


According to the US Department of Labor, nonfarm payrolls increased by 119,000 in September, more than double the market consensus of 50,000. The unemployment rate for the same month rose by 0.1 percentage point to 4.4%, exceeding the market forecast of 4.3% and marking the highest level since October 2021 (4.5%).


Since the Federal Reserve's quarterly economic outlook uses the unemployment rate as a key labor market indicator, the market placed greater emphasis on this figure.


Hawkish remarks from key Fed officials continued overnight. Loretta Mester, President of the Federal Reserve Bank of Cleveland, and Michael Barr, Vice Chair of the Fed, both highlighted persistent inflationary pressures. While Mester does not have a vote at this year's FOMC, she will gain voting rights next year.


Austan Goolsbee, President of the Federal Reserve Bank of Chicago and a current FOMC voter, stated at an event in Indianapolis, "Inflation appears somewhat stagnant and may even be heading in the wrong direction," adding, "It would be uncomfortable to preemptively cut rates too much in the short term."


Meanwhile, Kevin Hassett, a candidate for the next Fed Chair and a member of the National Economic Council (NEC), told Yahoo Finance that "a strong jobs report does not mean the Fed should pause rate cuts," arguing that the Fed should lower rates next month. He emphasized, "It is not prudent to assume that a strong jobs report is enough to offset other factors."


Additionally, Fed Governor Lisa Cook warned of the risk of sharp declines in asset prices during a speech at Georgetown University, citing elevated valuations across equities, corporate bonds, leveraged loans, and housing relative to historical benchmarks. She noted, "My impression is that the likelihood of a significant drop in asset prices has increased."


This, combined with concerns over an 'artificial intelligence (AI)' bubble, sharply dampened risk appetite and triggered a steep sell-off on Wall Street, with the Nasdaq falling more than 2%.


Reflecting these developments, US Treasury yields fell on the previous trading day, with the two-year yield down 5.9 basis points to 3.5350% and the 10-year yield down 5.3 basis points to 4.0860%.


Shortly after the market opens today, the Korea Customs Service will release export trends for November 1–20.


(Market Team, Economic Department Reporter)

jhson1@yna.co.kr

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