BOK “Domestic Asset Prices Rise Faster Than Major Countries”

The Bank of Korea diagnosed, “Recently, the rate of increase in the price of assets such as domestic houses and stocks has been considerably faster than that of major countries such as the United States and Germany.”

The BOK made such a diagnosis in its Monetary Credit Policy Report on the 11th and warned that “if the rise in asset prices continues in a situation where economic uncertainty is still high due to the re-proliferation of Corona 19, there is a possibility that asset inequality and financial imbalance may intensify.”

In particular, he pointed out that “the recent rise in housing prices is closely linked to the increase in private debt, so it is necessary to be more cautious in that it may act as a risk factor for the financial system and the macro economy in the future.”

The BOK said, “The recent rise in domestic asset prices was influenced by the easing of macro-financial policies at home and abroad and the optimistic expectation of an increase in asset prices by economic actors.” “This recent increase in asset prices is common in major countries such as the United States and Germany. It appeared, but the rate of increase in domestic asset prices was quite rapid,” he diagnosed.

The BOK determined that the recent rise in housing prices was caused by concerns about a shortage of supply and rising jeonse prices. In the case of a rise in jeonse prices, it is believed that it has also acted as a factor in converting jeonse demand into some trading demand, centering on mid- to low-priced housing in the metropolitan area.

The BOK analyzed that the rising domestic long-term interest rate, which has continued since the second half of the year, is largely influenced by external factors such as a global economic recovery and rising interest rates in major countries in line with inflation expectations.

The BOK said, “The domestic long-term market interest rate (10-year KTB) has generally steadily increased since August last year.” It rose to 1.96%,” he said.

The BOK assessed that the rise in domestic long-term interest rates was a result of a combination of factors such as rising US interest rates, improving domestic and international economic indicators, easing hedging sentiment, and burden on supply and demand for government bonds.

US Treasury yields have risen sharply since August of last year as expectations for massive economic stimulus and economic recovery were reflected. In this year, expectations for economic recovery have strengthened due to the promotion of additional large-scale stimulus measures and the supply of vaccines, inflation increases due to increased inflationary pressure on the supply and demand side, and the net supply of mid- to long-term US government bonds, which is expected to be the largest in history Interest rates rose further.

As the US Treasury bond rate rises, reflecting these expectations, long-term interest rates in major countries as well as Korea have risen in line with the US Treasury rate movement.

It was analyzed that some economic indicators at home and abroad were announced positively, and the risk aversion sentiment was eased due to the reduction of uncertainty in the US presidential election since November of last year, and the spread of the Corona 19 vaccine in major countries, which also contributed to the rise in interest rates.

In addition, concerns over an increase in the amount of KTB issuance were raised in the process of responding to Corona 19 in Korea and supporting the economic recovery, which also contributed to the increase in long-term interest rates. Based on the final budget of 2021, the total issuance of KTBs is 17.4 trillion won, which is similar to the total issuance of KTBs of 17.4 trillion won, reflecting the 1st to 4th supplements last year.

The BOK said, “In the future, long-term domestic interest rates are expected to be affected by the fiscal and monetary policies of major countries, the trend of Corona 19, the movement of government bond rates in these countries, and the domestic economic recovery and the supply and demand situation of government bonds.” And will respond appropriately if necessary.”

This monetary credit policy report was written for the period from the Monetary Policy Direction Decision Meeting in November of last year to the Monetary Policy Direction Decision Meeting in February of this year.

UPI News / Reporter Hye-young Kang [email protected]