HALISTER1: Korea Swaps Drop After U.S. Data; Reaction May Be Muted: SocGen

Korea Swaps Drop After U.S. Data; Reaction May Be Muted: SocGen

(Bloomberg) -- KRW and HKD swap rates had underperformed in run-up to U.S. nonfarm payrolls data, so are likely to see slightly more downside, Frances Cheung, head of Asia ex-Japan rates strategy at Societe Generale, writes in note today.
  • KRW rates market is only pricing in a small 20% chance for a rate cut in next three mos., hence if there’s any risk of correction in pricing, it’s likely to be on dovish side
  • Overall reaction should be muted, however, because of lingering uncertainty over timing of next Fed hike
  • NOTE: BOK will keep 7-day repo rate unchanged at 1.25% at Sept. 9 meeting, according to all 21 economists in Bloomberg survey
  • Yield on 1.875% govt bond due June 2026 slips 2 bps to 1.513% after climbing 11 bps last week: Korea Exchange data
  • 1-yr IRS down 1 bp at 1.2850%; 5-yr IRS down 2 bps at 1.2825%
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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Frances Cheung (Societe Generale SA)

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