Nine out of ten bond experts predicted that the base interest rate will be held steady at the Bank of Korea's Monetary Policy Committee meeting scheduled for the 13th.
The Korea Financial Investment Association announced on the 11th that, according to a survey conducted from the 30th of last month to the 5th of this month targeting 100 bond holding and management professionals, 93% of respondents expected the base interest rate to remain unchanged at this month's regular Monetary Policy Committee meeting.
Seven percent of the total anticipated a 0.25 percentage point (p) increase.
The association analyzed, "Last month’s consumer price inflation rate recorded 2.7%, approaching the Bank of Korea’s target (2%), which raised expectations for the base interest rate to be held steady this month."
Regarding domestic bond market interest rates next month, 27% of all respondents expected a decline. This figure increased by 12%p compared to the previous month.
The proportion of respondents expecting bond interest rates to rise was 25%, down 9%p from the previous month.
The association explained, "Expectations for a soft landing of the economy strengthened due to the return to a trade surplus and a slowdown in inflation indicators, leading to an increase in respondents anticipating interest rate declines next month."
The proportion of respondents expecting inflation to decline next month was 44% of the total, up 23%p from the previous month. Those forecasting inflation increases accounted for 9%, down 1%p.
Regarding the exchange rate, 79% expected it to remain stable next month, an increase of 4%p from the previous month. The shares forecasting exchange rate rises and falls were 11% and 10%, respectively, down 1%p and 3%p.
The association interpreted, "As international oil prices remain stable and the inflation slowdown trend becomes clearer, the number of respondents expecting inflation to decline next month increased."
It added, "While expectations for domestic economic recovery are anticipated to lead to won appreciation, concerns over additional tightening by the U.S. Federal Reserve (Fed) and yuan weakness due to China’s economic slowdown act as factors strengthening the dollar, resulting in mixed upward and downward pressures on the exchange rate."
Based on this survey, the June Bond Market Sentiment Index (BMSI) was calculated at 92.1, showing a slight decrease from the previous month’s 93.6 and indicating a stable trend.
The BMSI, derived from responses to survey questions, reflects market sentiment in the bond market; a value above 100 indicates expectations of falling bond interest rates (rising bond prices) and generally positive market sentiment.
A representative from the Korea Financial Investment Association added, "Although the domestic consumer price inflation rate entered the 2% range last month, caution over U.S. interest rate hikes led to a stable bond market sentiment next month."
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