NH Futures "Domestic Bond Market Weakness Expected"

The domestic bond market is expected to show weakness. This is due to upward revisions in benchmark interest rate forecasts following economic rebounds in major countries.

On the 19th, Yoon Seon-jung, a researcher at NH Futures, stated, "Today, government bond prices are expected to face downward pressure."

Previously, China's National Bureau of Statistics released economic indicators. Overall, the figures exceeded expectations, creating an atmosphere where achieving this year's growth target of 5% is becoming realistic. China's Q3 GDP increased by 4.9% compared to the same period last year. Although it slowed from Q2 (6.3%), it improved compared to Q1 (4.5%). China's retail sales in September also rose by 5.5% year-on-year, surpassing market expectations (4.8%). Industrial production in September increased by 4.5%.

Regarding GDP, researcher Yoon explained, "The economies of major countries have bottomed out and rebounded," adding, "Markets have revised upward their economic growth and benchmark interest rate forecasts." He further analyzed, "The authorities' claims that the domestic economic slowdown is easing are gaining traction, which will support the lower bound of real interest rates."

Fiscal deficits and exchange rates also support this analysis. Researcher Yoon diagnosed, "With increasing fiscal deficits, caution toward term premiums remains high, and the won-dollar exchange rate is again threatening 1,350 won, so arguments for raising benchmark interest rates to defend against won depreciation or for prolonging a high-interest-rate stance will gain strength."

Researcher Yoon also noted, "The weak demand in the recent 20-year U.S. Treasury auction globally undermined investor sentiment toward government bonds," forecasting, "As a result, government bond prices will also face downward pressure."

However, the rising number of open interest positions is a variable. Domestic interest rates are excessively high relative to economic strength and inflation. The increase in new long positions, mainly by domestic institutions, is also evaluated to affect the number of open interest positions.

Researcher Yoon stated, "Therefore, some support is expected at the lower end of bond prices," and added, "There is also anticipation that the Bank of Korea's Monetary Policy Committee will act as a force exerting upward pressure."

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