Stocks, won, etc. plunge due to retreat in preference for risky assets
Bond rates close higher… 10-year high in 2 years
Photo = Getty Image Bank
The domestic financial market fluctuated as the US Treasury yield rose. Stocks, a risky asset, plunged and the value of the won plunged. Treasury yields ended sharply in the aftermath of a rise in global interest rates.
KOSPI plunges close to 3%
On the 26th, the KOSPI index closed at 3012.95, down 86.74 points (2.80%) from the previous day. On this day, the index fell to 2988.28 during the intraday, but narrowed the decline in the second half of the market, keeping the 3000 line.
In the securities market, foreigners and institutions sold net sales of KRW 2.812.4 trillion and KRW 1.3 trillion, respectively. On the other hand, individuals bought 3.7683 trillion won. Individual net purchases were the third largest ever after January 11th (4,492.1 billion won) and 26th (4.25 trillion won).
The US Treasury bond rate jumped sharply, negatively affecting the stock market. On the 25th (local time), U.S. Treasury yields soared to 1.61% during the intraday due to concerns over rising prices (inflation). This is the highest in a year since February of last year. Based on the interest rate ending that day (1.518%), the US 10-year Treasury bond rate soared 0.34 percentage points over the past two weeks.
Lee Kyung-min, a researcher at Daishin Securities, said, “As the stock market has become more sensitive to interest rate variables, we need to open the possibility of expanding volatility in the KOSPI for the time being, given the market changes that are more sensitive to bad news than good news.”
Won-dollar exchange rate, surge
The won-dollar exchange rate also surged (weakened the value of the won). On this day, the won-dollar exchange rate in the Seoul foreign exchange market ended at 1123.5 won, up 15.7 won from the previous day. The daily increase is the largest since March 23 last year (20 won increase). Based on the closing price, it is the highest level since the 5th (1123.7 won).
As the US Treasury bond rate surged, the dollar strengthened, and the decline in preference for risky assets contributed to the surge in the won-dollar exchange rate.
Seungji Jeon, a researcher at Samsung Futures, analyzed that “as the overall risk preference sentiment was undermined by the rise in US Treasury yields, the stock market declined and the currencies of emerging countries were markedly weakened.
Domestic treasury bond interest rate’leaping’… Highest in 2 years of 10 years
Domestic treasury bond interest rates also rose.
On this day, in the Seoul bond market, the 10-year Treasury bond yield surged 7.6bp (1bp=0.01% point) to 1.960% per year. The 10-year interest rate reached the highest level in two years. The 3-year bonds also rose 2.5bp to 1.020% per year, while the 5-year and 1-year bonds rose 7.5bp and 0.8bp respectively, ending at 1.449% per year and 0.673% per year.
20-year bonds rose 4.1bp to 2.044% per year. The 30-year and 50-year bonds rose 5.1bp and 5.1bp, respectively, recording 2.055% per year and 2.055% per year.
The rise in US Treasury yields also affected domestic bond yields. The 4th emergency disaster subsidy issue was also involved. Discussions on the additional budget (additional budget) are in earnest in order to finance the disaster support fund, as there is a high possibility that a large portion of the supplementary fund will be raised in deficit government bonds.
If a lot of government bonds are printed, the quantity of government bonds increases and the price of government bonds falls. For bonds, the price and interest rate move in opposite directions, so if the price falls, the interest rate rises.
The Bank of Korea said it plans to implement a simple purchase of 5 to 7 trillion won worth of KTBs in the first half of this year. This is to stabilize market interest rates with increased volatility.
Reporter Lee Song-ryul [email protected]