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Responding to growing speculation that the South Korean central bank may soon lower the key rate due to uncertainties, Treasury bond interest rates hit record lows this year, market observers said Sunday.
The price of gold, on the other hand, remained high and reached a new high, reflecting investors' growing appetite for low risk badets.
The yield on three-year Treasury bonds closed at 1.470% on Friday, marking the first case in which it has fallen below 1.5% since November 2016, according to the Korea Financial Investment Association.
The bond interest rate remained low throughout the first half of this year, as the intensification of the trade war between the United States and China weighed on financial markets around the world.
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Lee Ju-yeol (Yonhap), Governor of the Bank of Korea |
The figure fell below 1.75% – the current key rate set by the Bank of Korea – on April 24 and has since prolonged its slowdown.
In early June, the Korea Capital Market Institute said in its report that the yield would remain slightly above the 1.4% mark in the second half of the year, if trade tensions between the United States and China remained unchanged.
This was the last allusion to a monetary easing announced by BOK Governor Lee Ju-yeol, which accelerated the depreciation of Treasury bonds.
"As external uncertainties increase due to the US-China trade dispute, as well as the weakening of the semiconductor industry, the BOK should respond appropriately to deal with such changes. of economic conditions while closely monitoring the situation, "said Lee a speech celebrating the 69th anniversary of the founding of the bank.
This marks a clear break from its previous position of eliminating the immediate need to reduce the policy rate – by 25 basis points, from 1.75% currently to 1.5%.
In May, the BOK's monetary policy council once again froze the key rate, citing the country's financial stability and macroeconomic conditions.
After the BOK chief's apparent policy change, the three-year Treasury yield dropped to 1.469%, its lowest level since the beginning of the year, close to the record of 1.426%.
The trend in bond yields for this week and the rest of the year will largely depend on the progress of the Washington-Beijing trade conflict, which will materialize at the Group of 20 summit to be held in Osaka, Japan. June 28th and 29th. , note the experts.
Although most predicted a drop in the BOK's in-coming rate in July, depending on the results of the G-20 summit, some even suggested that the central bank could further reduce the rate by the end of the year. year.
"We can not rule out the possibility that the BOK will lower the key rate twice in the second half, in which case bond yields will fall more than the current level," said Lee Geun-tae, researcher at LG. Institute of Economic Research.
In contrast, according to the Korea Exchange gold market, the price per gram reached 51,370 won ($ 43) on Friday, setting a new record since the market opened in March 2014. This record surpbaded the previous record of 50,910 won that had been observed in July 6, 2016, the day of the Brexit decision.
By Bae Hyun-jung ([email protected])
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