Seven out of 10 bond experts in South Korea project the Bank of Korea won’t move to lower the benchmark rate this week in order to wait until the U.S. lowers its first.
According to a survey conducted by the Korea Financial Investment Association (KOFIA) on 200 bond traders from 104 institutions, 70 percent believed the central bank would maintain its key rate unchanged at 1.75 percent despite heavy bets for a cut amid prolonged global trade tensions and economic slowdown at home. The remaining 30 percent expected a rate cut, according to the poll.
The bond market survey index (BMSI) came to 114.6 for August, up 5.7 points from 108.9 for July. A reading above 100 means more people have optimistic outlook on the bond market and vice versa for a reading below 100.
The improved confidence was driven by strengthening preference for safe assets on the back of mounting uncertainties at home and abroad, the association said.
The survey also found that 37 percent of the bond experts believed the yields on three-year government bonds would increase in the next month, up 4 percentage points from the previous poll. About 55 percent expected the yields would remain steady, down 1 percentage point, and 8 percent projected a cut, down 3 percentage points.
The BMSI for the exchange rate plunged from 106 to 80 for August, as 30 percent of the bond traders, 14 percentage points more than the previous poll, expected the Korean won would keep weakening next month as the escalating trade friction with Japan would weigh on the Korean economy, the KOFIA said.
By Chung Seok-hwan and Choi Mira
[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]