[채권마감] Ultra-long term 2% breakthrough due to quota factor ‘1 year and 11 months only’

10-year-standard interest rate difference 9 years and 9 months, 10-3 years, the maximum in 10 years, the US 10-year interest rate also surpassed 1.2%
Domestic and overseas fiscal expansion + economic recovery + inflation increase expectation + bidding burden
Foreigner futures buying position is also burdensome.. bear stiffening market likely to continue

The bond market recorded a bearish market for two consecutive days (based on 10-year KTBs). In particular, the ultra-long term of 20-year KTBs exceeded 2%, breaking the highest level in 1 year and 11 months. As the 10-year Treasury Bond yield also peaked in 1 year and 9 months, the gap between 3-year bonds and 7-day bonds with redemption conditional bonds (RP) was only 9 years and 9 months. Recorded the maximum in

During the Lunar New Year holidays, expectations for economic stimulus measures and inflation concerns in the US increased. Accordingly, the 10-year U.S. bond yield exceeded 1.2% and reached the highest level in one year (2.082% as of the 12th local time, the highest since 1.2648% on February 27 last year).

In Korea, concerns about the supply and demand burden of the 4th disaster support fund spread. President Moon Jae-in also said at a meeting of the chief advisors in the afternoon following the Democratic Party’s representative Lee Nak-yeon in the morning of that day, that the job budget should be fully included in the additional budget for disaster support funding.

Amidst this, the 10-year government bond bidding, which was conducted by the Ministry of Strategy and Finance with a scale of KRW 2.99 trillion, was a burden. On the other hand, foreigners tried to buy in the spot futures market, stopping the bear market.

Participants in the bond market saw a strong bearish pressure in that they are expected to continue bidding for KTBs along with the expectation of a supply and demand burden due to fiscal expansion at home and abroad, economic recovery, and rising inflation. The yield curve is also expected to be more stiffened.

According to the bond market and financial investment association on the 15th, the two-year Tongan rose 0.6bp to 0.860%, and the 3-year KTB rose 0.3bp to 0.998%. The 5-year KTB rose 2.5bp to 1.362%, the highest since December 17th last year (1.367%). The 10-year KTB rose 4.0bp to 1.871%, the highest since May 13, 2019 (1.874%).

The 20-year KTB rose 3.9bp to 2.004%, the 30Y KTB rose 3.8bp to 2.012%, and the 50Y KTB rose 3.8bp to 2.012%. This was the highest on March 20, 2019 (2.008%), March 19 (2.026%), and March 12 (2.019%), respectively. The 10-year KTB inflation ended at 0.686%, up 0.4bp.

When looking at the difference in interest rates between the BOK standard rate (0.50%) and KTB, it was 49.8bps compared to the 3-year bond. It was 86.2bps for 5-year products, which was the highest since December 17th (86.7bps) last year, and 137.1bps for 10-year products, respectively, since May 11th, 2011 (141.0bps). The fifty-year record was 151.2bp, which was the record high on the 8th (148.4bp).

The spread over the past 10-3 years was 87.3bp, which increased 3.7bp, the largest since February 16, 2011 (89bp). The difference in interest rates for 10-5 years also increased by 1.5bp to 50.9bp, the most since October 26, 2010 (52bp). Break-even inflation (BEI), the difference in interest rates between KTBs and inflation, rose 3.6bp to 118.5bp, rising for three consecutive trading days.

Foreigners bought 487.3 billion won worth of money instead of selling 35.6 billion won in the spot market. 21.5.18 shares worth 200 billion won, 20-9 stocks 109 billion won, and 20-6 stocks 100 billion won.

The 3-year Treasury bond futures with maturity in March ended at 111.54, down 4 ticks from the battlefield. The intraday fluctuations between 111.52 and 111.57 were only 5 ticks.

Unpaid contracts reached 370,8766 contracts, a record high since December 11 (38,2885 contracts) of last year. On the other hand, the transaction volume was only 75,289 contracts. The turnover rate was the lowest after the 21st (0.19 cycles) of 0.20 cycles.

By trading entity, Investment Trust net sold 1379 contracts. Financial investment also continued to sell for the third day after net selling of 1216 contracts. On the other hand, foreigners bought 1,520 contracts net, and started buying for three consecutive days.

The 10-year Treasury bond futures maturing in March showed 128.61, down 34 ticks from the previous trading day. This is the lowest since November 12, 2019 (128.55). The intraday low was also 128.53, the lowest since November 12, 2019 (128.49). The high point was 128.83, and the intraday fluctuation was only 30 ticks.

The outstanding contracts were 12,9533 contracts, and the transaction volume was 68259 contracts. The combined turnover rate of 26 outstanding contracts for the original month and 3 contracts for transaction volume was 0.53 times. This is the highest since January 6th (0.64 episodes).

By trading entity, financial investment turned to sell after 7 trading days after net selling 2722 contracts. On the other hand, foreigners seemed to net purchase 2772 contracts.

In the case of the in-kind futures theorist, the 3rd line scored 6 ticks for the low rating and the 10th line scored 4 ticks for the low rating. There were no spreads between the 3rd and 10th lines.

A bond dealer at a securities firm said, “The interest rate on US bonds has risen due to expectations for economic stimulus and concerns about inflation. The won bonds also started weak. As the burden of bidding pressed the market, the increase in interest rates widened. The curve was also standing, but the variables that could relieve the burden on the absolute quantity were limited, so the weakness and the curve tip were not easily controlled.”

He also said, “The market liquidity is abundant, but bidding continues. Amid the current weakness, the curves tip is expected to continue. Today’s foreign futures buying position may come as a burden,” he added.

A bond dealer of an asset management company said, “The US 10-year interest rate exceeded 1.20% due to expectations of economic stimulus and inflation concerns during the Lunar New Year holiday. The domestic bond market also started rising ahead of rising foreign interest rates and 10-year bidding. In the morning, the weakness of foreign futures purchases was reduced, but after the remark that Nak-Yeon Lee, the Democratic Party’s representative, should include not only disaster subsidies but also job budgets, the weakness in supply and demand increased. In the afternoon market, foreigners reduced their purchase of 10-year futures and continued a bearish atmosphere.”

He continued, “Materials for rising interest rates, such as the burden of supply and demand from domestic and overseas fiscal expansion, economic recovery, and expectations of rising inflation, still dominate. For the time being, the bear market is expected to continue.”