Samsung Securities "Short- and Medium-Term Bond Yields Already Past Their Peak"

[Image source=Yonhap News]

[Asia Economy Reporter Hwang Yoon-joo] Samsung Securities has assessed that the short- to medium-term yields on Korean government bonds have already passed their peak.

On the 12th, Samsung Securities stated, "Currently, short- to medium-term yields reflect the base interest rate of 3.25~3.50%," adding, "If the base rate hikes stop below this level, the potential for bond yields to rise further is limited."

Kim Ji-man, a researcher at Samsung Securities, said, "Until the 8th, the 3-year government bond yield was stable, while the 5- to 50-year segment was on a decline," and evaluated, "The fact that bond yields rose to near the previous peak confirmed in mid-June earlier this month and then resumed a downward trend provides some relief." However, he cautioned that it is premature to definitively conclude a trend reversal.

Kim cited bargain buying as the reason for the resumption of the decline in bond yields. He explained that Korea's August consumer price index fell short of expectations, providing some relief to investor sentiment.

Kim analyzed, "Energy prices have dropped to levels seen in January, raising expectations that the recent trend of slowing inflation will continue," and added, "Statements from central bank governors and Federal Reserve officials are also showing signs of shifting away from the previously hawkish stance."

West Texas Intermediate (WTI) crude oil was priced in the $100 range per barrel until July. However, it dropped below $90 at the end of August and has currently fallen to around $83.

Kim pointed out, "Expectations for the peak of Korea's base interest rate, as seen through forward rates, have not risen to the levels of concern that spread in June," and noted, "Expectations for the peak of the U.S. base interest rate, as seen through Eurodollar futures rates, remain near 4%, confirmed in June."

He then diagnosed, "If expectations do not rise to higher levels, the possibility of bond yields rising significantly will also be limited." According to Kim, the current short- to medium-term yields can be seen as reflecting the base interest rate of 3.25~3.50%.

He evaluated, "If the base rate hikes stop below this level, the potential for bond yields to rise further is limited."

He continued, "If next week's U.S. CPI confirms further easing of inflationary pressures (June 9.1% → July 8.5% → August consensus 8.1%), the interest rate trend could move away from a purely upward trajectory," and concluded, "At least for the short- to medium-term segment of three years or less, the peak has already been passed."

This content was produced with the assistance of AI translation services.