HALISTER1: Korea Swaps Curve to Steepen on Fed Hike Bets: Societe Generale

Korea Swaps Curve to Steepen on Fed Hike Bets: Societe Generale

(Bloomberg) -- Global rates may rise in next 12 months and lead to steepening of Korea’s interest-rate swaps curve, Frances Cheung, head of rates strategy, Asia ex-Japan at Societe Generale in Hong Kong, writes in note today.
  • Korea’s 2y/5y part of the curve has tended to steepen when Fed hike expectations rose
  • Domestic monetary policy expectation in Korea can mitigate increases for front-end KRW rates
  • KRW rate market not pricing in much BOK easing, at around 25% chance of a 25 bps cut in next 12 mos.
  • Recommends paying 5-yr KRW NDIRS vs receiving 2-yr KRW NDIRS, at a spread of 2 bps with target of 26 bps and stop at -10 bps
  • 2-yr NDIRS steady at 1.2900%; 5-yr contracts up 1 bp to 1.3125%
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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GLE FP (Societe Generale SA)

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Frances Cheung (Societe Generale SA)

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