58% of Bond Experts Predict Market Interest Rates Will Fall in January Next Year

Six out of ten bond experts predicted that market interest rates in the bond market will fall in January next year. On the 22nd, the Korea Financial Investment Association announced this through the 'January 2024 Bond Market Indicator.' This is based on an analysis of responses from 100 individuals involved in bond holding and management conducted from the 13th to the 18th of last month.

Korea Financial Investment Association, Yeongdeungpo-gu, Seoul.

58% of respondents expected interest rates to decline in January next year. The proportion of respondents who answered similarly last month was 30%. As the U.S. Federal Reserve (Fed) hinted at the possibility of three rate cuts next year through its dot plot, the number of respondents anticipating a rate decrease also appeared to increase.

Conversely, the proportion of respondents who expected interest rates to rise in January next year decreased by 5 percentage points from 13% last month to 8%. While inflation-related bond market sentiment remained steady compared to the previous month, sentiment related to exchange rates improved.

82% of respondents forecasted stable inflation in January next year, up from 74% last month. The proportion of respondents expecting a decline in inflation decreased by 6 percentage points from 22% last month to 16%. This is likely due to increased expectations that the inflation rate will gradually slow down, thanks to falling international oil prices and the extension of fuel tax reduction measures.

As the U.S. Federal Reserve signaled the end of the rate hike cycle, the number of respondents expecting a decline in the exchange rate also increased. Those who anticipated a drop in the KRW-USD exchange rate in January next year rose by 22 percentage points from 20% last month to 42%.

According to these survey results, the Bond Market Sentiment Index (BMSI) for January next year was recorded at 108.7, up from 106.6 the previous month. A BMSI above 100 indicates 'improvement' in bond market sentiment, while below 100 indicates 'deterioration.'

Interest Rate Outlook BMSI Trend [Data Provided by Korea Financial Investment Association]

An official from the Korea Financial Investment Association said, "With the U.S. Federal Open Market Committee (FOMC) holding the base rate steady for three consecutive times in December, and the tightening cycles of major countries ending along with expected rate cuts next year, bond market sentiment in January improved compared to the previous month."