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(Seoul=Yonhap Infomax) The Seoul bond market is expected to remain cautious on the eve of the November Monetary Policy Committee (MPC) meeting.
This week, which coincides with the MPC schedule, has seen a clear pattern of early strength followed by weakness. Two days ago, the market turned bearish, and yesterday, gains were halved, reflecting heightened caution.
Today is likely to see a similar atmosphere, with foreign investor activity and an emergency press briefing by currency authorities emerging as key variables.
Deputy Prime Minister and Minister of Economy and Finance Koo Yun-cheol is scheduled to hold a press briefing at 10:00 AM KST.
Koo is expected to address recent economic developments, including the foreign exchange market, and deliver a message on stabilizing the won.
Notably, this briefing was arranged abruptly just a day in advance, underscoring the authorities’ serious monitoring of current won levels and volatility.
Earlier this week, it was reported that the Ministry of Economy and Finance, Bank of Korea, other currency authorities, the Ministry of Health and Welfare, and the National Pension Service would activate a four-party consultative body to stabilize the FX market. With another stabilization message set to follow within a day, market attention on the won is intensifying.
Market participants widely expect the MPC to adopt a hawkish stance in line with the authorities’ focus on currency stability. However, some suggest that strong FX intervention could actually give the MPC more policy flexibility.
For now, the market is likely to continue pricing in expectations ahead of tomorrow’s MPC meeting, following confirmation of Koo’s emergency briefing.
Overnight, the global dollar weakened on hopes for a ceasefire in Ukraine. The dollar index (DXY), which measures the greenback against six major currencies, fell below the 100 mark.
The US Treasury market focused on foreign media reports that Kevin Hassett, White House National Economic Council (NEC) member, is a leading candidate for the next Federal Reserve (Fed) chair, with the December Federal Open Market Committee (FOMC) meeting just two weeks away.
Hassett is seen by President Donald Trump’s close aides as someone who could deliver the rate cuts Trump desires from the Fed.
With expectations for a December FOMC rate cut rising since last weekend, these reports fueled a fourth consecutive session of gains in US Treasuries.
Additionally, major US economic indicators all came in weaker than expected.
According to ADP, a private employment data provider, US preliminary private employment fell by an average of 13,500 per week over the four weeks ending November 8, widening from the previous week’s 7,500 drop and marking a third straight week of declines.
Meanwhile, US Department of Commerce data showed September retail sales rose 0.2% month-on-month, slowing from August’s 0.6% and missing market expectations of 0.4%.
Core retail sales (control group) fell 0.1% month-on-month, the first negative print since April.
The US Department of Labor reported that the September Producer Price Index (PPI) rose 0.3% month-on-month, in line with expectations. Core PPI rose 0.1%, below the 0.2% consensus.
Reflecting these developments, the previous session saw the US 2-year Treasury yield fall 3.0 basis points to 3.4690%, while the 10-year yield dropped 2.9 basis points to 3.9980%. The 10-year yield closed below 4% for the first time since October 28 (3.9780%).
Over the past four sessions, the US 10-year Treasury yield has fallen more than 14 basis points, while the Korean 10-year government bond yield declined by just over 2 basis points.
Following the November MPC meeting, the influence of global trends and foreign investors is expected to increase toward year-end and early next year, with potential for further outperformance relative to global peers.
(Market Team, Economics Department)
jhson1@yna.co.kr
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