SOUTH KOREA: The Dual Drivers for the Korean Bond Market in 2025.
Dec-03 02:28
- Today’s CPI release in Korea sees inflation remaining below the BOK’s 2% target indicating the need for further rate cuts in 2025.
- There may however be signs that inflation is stabilizing when looking at the release further.
- CPI less energy and food increased +1.9% y/y whilst a commonly followed cost of living index rose from +1.2% in October to +1.6%.
- It may be too soon to forecast that inflation is stabilizing but if it is, it may challenge the -88bps of rate cuts the market has priced over a in at present over a 1-year time horizon.
- An additional challenge for the bond market in 2025 is likely to come from the politicians where it seems that the opposition is opposing the KRW677 trillion budget, placing pressure on the current government.
- The budget proposed is a 3% increase in expenditure and likely to be funded via the bond market if approved.
- If signs of inflation stabilising are met with new budget approval, the usually flat Korean 3s10s curve has the potential to steepen in 2025.
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US: Biden Remarks In Philadelphia Underway Shortly
Nov-01 20:31
US President Joe Biden is shortly due to deliver remarks in Philadelphia, Pennsylvania on his administration's "historic support for unions". LIVESTREAM
- The speech is a rare forray for Biden into presidential election swing states, with the Harris campaign reportedly preferring to keep distance from the President. A speech in critcal Pennylvania, and another event planned for Saturday, may suggest that Harris has calculated that Biden's appearance may help shore up some blue-collar votes in a state the president retains high levels of support.
- However, considering a recent gaff, Biden's comments will be closely scrutinsed by the press and Republican operatives for any remarks that can be used in last-minute campaign material.
- CNN noted: "More broadly, a Biden comment that will be portrayed by pro-Trump media as contempt for the ex-president’s supporters came at exactly the moment that Harris is trying to come across as a unifying figure to win over Republicans who are disaffected with Trump’s extremism but are not yet ready to take the leap to vote for a Democrat."
- The Washington Examiner notes, in an article summarising the various problems Biden has caused Harris: "The president, now entering his final few months in the White House, may have more trouble with the errant comments. The Associated Press reported Thursday that the White House press office altered the stenographed transcript in a bid to clean up what Biden had said."
US TSY OPTIONS: BLOCK: Large Dec'24 5Y Call Spread
Nov-01 19:59
- 28,591 FVZ4 107.5/109.5 call spreads, 22 vs. 106-30.5/0.30% at 1551:32ET
US TSYS: Late Treasury Roundup: Ignoring Jobs Data, Yields Climb Ahead Election
Nov-01 19:34
- Curves maintained steeper profiles late Friday, despite Treasury futures gradually reversing this morning's post NFP-tied bid. Fast two-way trade reported as Treasury futures briefly extended lows than rebound gap higher after the latest employment report shows much lower than expected jobs gain and down revision to prior, unemployment rate in-line with expectations.
- Support evaporated after higher than expected S&P Global US Manufacturing PMI, Construction Spending and ISM prices paid data. After the bell, the Dec'24 10Y contract trades through round number support to 109-31.5 (-15.5) while curves hold steeper levels -- reflecting improved rate cut expectations on the day: 2s10s +4.592 at 15.594 (vs. 7.660 low), 5s30s +3.035 at 34.538 (vs. 28.331 low). After
- Projected rate cuts into early 2025 held firmer vs. late Thursday levels (*): Nov'24 cumulative at -24.6bp ( -23.5bp), Dec'24 -45.9bp (-42.8bp), Jan'25 -59.2bp (-58.1bp), Mar'25 -74.8bp (-75.0bp).
- Greenback initially weakened across the board after the lower-than-expected headline, but the murky details around industrial action and hurricanes likely containing the market fallout here. The USD reversed course throughout the session, terminal rates in the US stronger climbs on the week which contributed to the strong dollar reversal on Friday, with the USD index looking to close the week broadly unchanged around 104.25.
- Looking ahead, the US Presidential Election on Tuesday and the FOMC decision unusually on a Thursday are two major risk events in an otherwise light US calendar.
