60% of Bond Experts Expect Inflation to Continue Rising Next Month

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Hwang Junho] More than six out of ten bond experts predicted that inflation will rise next month.

According to the 'April Bond Market Sentiment Index (BMSI)' announced by the Korea Financial Investment Association on the 21st, the inflation BMSI was surveyed at 35.0, down 27.0 from the previous month (62.0). BMSI is calculated based on the responses of survey participants, where a value above 100 indicates market improvement, and below 100 indicates deterioration. This month's survey was conducted from the 10th to the 15th, targeting bond-related workers (200 institutions, 913 people), with responses from 52 institutions and 100 people (including foreign firms) used to calculate the index.

In the case of the inflation BMSI, the number of bond experts expecting inflation to rise increased significantly, resulting in a sharp decline in the index. The percentage of experts predicting inflation increase was 67.0%, a significant rise from 38.0% the previous month. Respondents expected that "inflationary pressures will continue due to global supply bottlenecks and rising import prices caused by oil price increases."

On the other hand, investment sentiment related to interest rates and exchange rates was expected to improve. The interest rate BMSI was 85.0, higher than the previous month's 47.0, indicating improved bond market sentiment regarding market interest rates. Respondents forecasted "several interest rate hikes by the U.S. Federal Reserve (Fed) this year," but also anticipated interest rate increases due to "external uncertainties caused by the Russia-Ukraine conflict and concerns over economic slowdown due to prolonged tensions."

The exchange rate BMSI also rose 26.0 points from the previous month to 79.0 (previously 53.0%). The proportion of those expecting stable exchange rates increased from 49.0% to 57.0%, significantly raising the exchange rate BMSI. Despite the Russia-Ukraine conflict and sharp oil price increases, considering the burden of the elevated exchange rate level and the stance of the Federal Open Market Committee (FOMC), it was judged that the likelihood of a significant exchange rate increase next month is low.

The combined BMSI of the three indicators was 86.4 (previous month 84.9), showing a slight increase from the previous month. The association analyzed that "bond experts continue to be concerned about inflation, but with improved interest rate outlook BMSI due to geopolitical risks between Russia and Ukraine, the bond market sentiment in April showed a stable trend compared to the previous month."