[Preference for Short-Term Deposits] ① Yetech Users Holding the Bat Short... Surge in New Transactions

Over 10 trillion won flowed into bank deposits in October alone, with the amount of new short-term deposits with maturities of six months or less at banks also increasing by more than 4 trillion won during the same period.

As competition for deposits among financial institutions has begun, it is interpreted that the "Yetech" (deposit + investment) crowd is adopting a strategy of "holding the bat short," expecting deposit interest rates to rise further in the future.

According to the financial sector on the 1st, as of the 27th of last month, the balance of time deposits at the four major commercial banks (KB Kookmin, Shinhan, Woori, Hana) was about 664.2 trillion won, an increase of approximately 1.6% compared to the end of the previous month. In one month, about 10.5 trillion won of idle funds flowed into deposits.

The reason behind this reverse money move phenomenon is attributed to the recent slump in the stock and real estate markets, along with rising deposit interest rates. The deposit (savings) interest rate based on new deposits at deposit banks remained at 3.65% in August but rose to 3.81% in September.

Meanwhile, the number of Yetech enthusiasts choosing short-term deposits with maturities of six months or less has recently increased, drawing attention. As of the 27th of last month, the amount of new personal time deposits with maturities of six months or less at the four major commercial banks was about 16.73 trillion won. This is an increase of about 4 trillion won compared to the previous month (12.72 trillion won).

Short-term deposit products are gaining attention because more Yetech enthusiasts are holding the bat short, anticipating further interest rate hikes. In other words, the strategy is to keep the maturity structure short to maximize interest income from rising rates. A financial sector official said, "Customers seem to believe that interest rates will rise further and are putting their money into six-month products with slightly higher rates, then reinvesting when the maturity comes."

This is also related to banks' fund management. Last year, banks raised funds by offering high-interest deposit products with annual rates of 4-5% amid market tightening caused by incidents like the Legoland case, and many of these matured simultaneously this year. To prevent this situation from recurring next year, banks are creating portfolios that diversify maturity structures.

As of the day before, looking at deposit products at the four major banks, some commercial banks apply higher interest rates to six-month maturity products than to 12-month ones, and even ultra-short-term products of three months or less offer high rates in the high 3% range.

This long- and short-term interest rate inversion phenomenon is linked to the rise in financial bond yields and last year's unique market conditions. The interest rate on six-month financial bonds, which affect short-term deposit products (average by rating agencies), rose from 3.820% on the 1st of last month to 4.068% as of the 27th of this month, an increase of 0.248 percentage points.

However, there is also a view that this situation is temporary. A representative from a commercial bank said, "Many experts expect interest rates to fall in one to two years, and considering that the five-year deposit interest rate has dropped to the mid-3% range, signals of (rate cuts) will likely appear after some time." Another bank official added, "This year was a special situation, and since the bank bond issuance limit regulation was abolished to prevent excessive competition, it seems unlikely that deposit interest rates will soar beyond the 4% range."