IRS Rates Decline—CD Fixing Impact and Short-Term Bid Prevail

(Seoul=Yonhap Infomax) Jee Hyun Son – Interest rate swap (IRS) rates fell in the Seoul bond market.

As of 16:28 on the 25th, the 1-year IRS rate dropped 0.50 basis points from the previous session to 2.7100%.

The 2-year and 3-year tenors declined by 0.25bp and 0.50bp, respectively.

The 5-year IRS rate fell 0.75bp to 2.9800%, while the 10-year dropped 2.00bp to 3.1150%.

A dealer at a local securities firm said, “There was notable bid (selling) demand in the short-term segment,” adding, “With tomorrow marking three months ahead of the February Monetary Policy Board meeting, the certificate of deposit (CD) fixing issue also came into play.”

IRS transactions involve exchanging the fixed IRS rate for the floating 91-day CD rate. The CD rate, which is reset every three months, exposes IRS trades to ‘fixing’ risk.

Conversely, cross-currency swap (CRS) rates based on SOFR generally rose.

The 1-year CRS (SOFR) rate increased by 1.00bp to 2.1150%.

The 5-year CRS (SOFR) rate climbed 2.00bp to 2.5800%, while the 10-year remained unchanged at 2.6550%.

The swap basis inversion between CRS (SOFR) and IRS narrowed overall.

The 1-year inversion narrowed by 1.50bp to -59.50bp, and the 5-year inversion narrowed by 2.75bp to -40.00bp.

jhson1@yna.co.kr

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