SOUTH KOREA: JGB Correlations Rise, Momentum Indicators Remain Bearish
Feb-10 03:48
- Correlations with JGBs are strong at the moment with yesterday's falls being taken back Tuesday, following the lead from Tokyo.
- Having finished Monday down -0.26 at 109.88 ( new contract low), the Korean 10-Yr is up +0.64 today; its biggest one day gain for the year.
- The losses yesterday saw the 10-yr near oversold on the 14-day Relative strength only to retreat back towards neutral. However the MACD (white) line remains below the Signal (red) line, suggesting that the bearish downtrend still remains
- Korea's 3-Yr bond future is up up +.14 today to 104.81 after limited moves yesterday.
- Cash is strong also with 3-Yr yields at 3.237 (down -4bps) and 10-Yr at 3.70% (down 4.5bps).
- The reaction to the moves in JGBs in part reflects the limited expectations for monetary policy in the first half of the year, and data releases in line with expectations. This leaves bond investors turning their attention elsewhere for leads as to the direction of KTBs. This could be a problem for the BOK who only in December conducted its first purchase of 5-10-20year government bonds in over three years to halt rising yields whilst the FSC extended a market stabilization programmes through 2026 to include KRW37.6 tn of purchases.
- Bond traders in Korea will now turn their attention to NFP in the US where sensitivities to downside surprises in data are growing.
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AUSSIE 3-YEAR TECHS: (H6) Recovery Mode
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- RES 3: 97.796 - 1.618 proj of the Sep 3 - 12 - 15 price swing
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