HALISTER1: Korea Central Bank Decision to Support Curve Steepener: Deutsche

Korea Central Bank Decision to Support Curve Steepener: Deutsche

(Bloomberg) -- Maintain KRW interest-rate swap steepener after BOK’s decision to hold rates amid improving economic sentiment and activities, Kiyong Seong, strategist at Deutsche Bank writes in note received today.
  • Recommends investors to pay KRW IRS 2Y/5Y (target +25bp) and 2Y/10Y (target +40bp)
  • Change in MPC statement to “support the recovery” from “sustain the recovery” may imply BOK’s conditional readiness to cut the policy rate
  • Focus now on government and politicians, and discussion about fiscal stimulus which could start within a couple of months
  • Foreigners’ relatively heavier net long position in the 10- year KTB futures support medium-term steepening bias
  • BOK will be joined by four new members, who are more dovish than the outgoing ones
  • Continues to expect 25bps rate cut as soon as May
  • NOTE: 2-yr IRS down 2 bps to 1.4425%; 5-yr contracts down 2 bps to 1.4950%
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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Kiyong Seong (Deutsche Bank AG)

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