South Korean Credit Spreads Hit Record Highs While Short-Term Bond Buying Pressure Emerges

According to Yonhap Infomax, on July 13, South Korea's credit spreads (credit spreads over benchmark rates) reached record highs, but short-term buying demand has begun to emerge as market participants expect the central bank to limit the number of interest rate hikes in this cycle to around four. Money market fund (MMF) assets increased 20.08 trillion won from the end of June, with bond funds seeing net inflows of 3.2 trillion won during the same period, according to the Financial Investment Association. The turnaround reflects easing concerns about consecutive rate hikes, with the dollar-won exchange rate declining from near 1,560 won to around 1,500 won levels. The yield on one-year special bank bonds stood at 3.711 percent, trading approximately 20 basis points above the implied benchmark rate even if four additional rate hikes were implemented.
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