[Click eStock] "Government Bond Yields and Exchange Rates Require Risk Management Zone"

DB Financial Investment diagnosed on the 15th that government bond yields and exchange rates are in a range requiring risk management.

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Moon Hongcheol, a researcher at DB Financial Investment, said, "From the supply side, high oil prices and high exchange rates cause high volatility in interest rates," adding, "In such situations, although it may not be desirable to prolong tightening longer than necessary, public opinion sometimes rushes to advocate for the prolongation of tightening."

Researcher Moon also mentioned the US Consumer Price Index (CPI) and income tax issues. He explained, "The CPI results are due to measurement issues rather than strong demand," and "The service sector remains high because prices such as automobile insurance premiums are adjusted with a lag." Regarding the income tax issue, Moon analyzed, "From mid-month to the 25th, federal government income tax payments are scheduled to be between 300 billion and 500 billion dollars," adding, "This may cause a short-term dollar liquidity shortage, negatively affecting asset prices including bonds and potentially putting upward pressure on the exchange rate."

Amid the complex influence of high oil prices, high exchange rates, CPI exceeding expectations, and tax issues on market participants' sentiment, Moon said that currently interest rates and exchange rates have technically broken above resistance levels, necessitating risk management. He added, "The best approach as an investor is to maximize time value while earning high carry when interest rates reach the upper range, preparing for upcoming economic shocks and rate cuts," and "For the US 10-year Treasury, a buy strategy based on carry attractiveness can be applied at the upper technical range within an upward trend, while for the won-dollar exchange rate, a strategy of range trading at resistance or chasing a breakout up to 1400 won can be employed."