Samsung Securities "2.80%~3.30% Expected for 3-Year Government Bonds in Second Half"

[Asia Economy Reporter Hwang Yoon-joo] Samsung Securities forecasted the 3-year government bond yield range for the second half of this year to be 2.80% to 3.30%. They judged that, amid the cycle of base rate hikes, short-term bonds are in the process of forming a peak.

On the 5th, Samsung Securities Research Center stated, "Korea's consumer price inflation rate and expected inflation have recently expanded their increase," and "we expect Korea's base rate to be raised two more times (in July and October) in the second half of this year."

The Research Center analyzed, "By the end of the year, Korea's base rate will reach 2.25%, approaching the neutral rate level (2.25~2.5%) that we consider."

Regarding bond yields, they diagnosed, "The increase was significant until early May, and since then, it has been moving sideways within a range," and "we believe bond yields have considerably reflected the steep base rate hike path."

They expected the bond market supply and demand to improve in the second half of the year. This is because the issuance scale of government bonds in the second half will decrease by about 30% compared to the first half due to the second supplementary budget without deficit bond issuance.

However, they did not see the bond market risk factors as resolved. The Research Center pointed out, "Since a 5% inflation rate is expected for the time being, vigilance toward inflation is likely to remain high."

They also explained, "The rapid changes in U.S. monetary policy have also pushed up domestic bond yields," and "since further U.S. base rate hikes and QT (quantitative tightening) are scheduled, sensitive reactions to changes in U.S. monetary policy may recur."

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