IRS Rates Fall Across All Tenors in Seoul Bond Market on May 28

Interest rate swap (IRS) rates in the Seoul bond market declined across all tenors on May 28 at 4:27 PM, with the 1-year IRS rate falling 1.25 basis points to 3.4475%. A securities dealer attributed the decline to futures-linked trading flows but noted short-term swaps showed relative weakness due to the possibility of an August rate hike. The dealer also mentioned that short-term swaps had risen following a CD fixing issue last week and are now in a lull.

IRS Rates Decline Across All Tenors on May 28

The 2-year IRS rate fell 3.50 basis points, while the 3-year rate dropped 4.00 basis points. The 5-year IRS rate declined 4.00 basis points to 4.0150%, and the 10-year rate fell 3.25 basis points to 4.1275%. A securities dealer stated that "futures-linked flows continued, but short-term swaps showed relative weakness due to the August rate hike possibility, so they were slightly weaker than futures." The dealer added that "after short-term swaps rose quite a bit last week due to the CD fixing issue, they seem to be in a lull now."

IRS transactions involve exchanging the fixed IRS rate with the variable 91-day certificate of deposit (CD) rate. Market participants are exposed to "fixing" risk, where the CD rate exchanged with IRS is determined every three months.

CRS (SOFR) Rates Show Mixed Movement

CRS (SOFR) rates rose in the short-term segment and fell in the mid-to-long-term segment. The 1-year segment increased 2.00 basis points to 3.2750%. The 5-year rate declined 0.50 basis points to 3.5750%, and the 10-year rate fell 0.50 basis points to 3.5200%.

Swap Basis Inversion Narrows Across Tenors

The swap basis inversion — the difference between CRS (SOFR) and IRS — narrowed across all tenors. The 1-year inversion narrowed 3.25 basis points to -17.25 basis points. The 5-year inversion narrowed 3.50 basis points to -44.00 basis points.

FAQ

What caused IRS rates to fall on May 28?
A securities dealer attributed the decline to futures-linked trading flows, though short-term swaps showed relative weakness due to the possibility of an August rate hike.

How much did the 5-year IRS rate fall on May 28?
The 5-year IRS rate declined 4.00 basis points to 4.0150% as of 4:27 PM on May 28.