FOMC 25bp Cut Validates Buy Strategy
Possible 'Milrim Saja' for 10-Year Treasury Yield at 3.1%
Meritz Securities stated on the 26th that the Jackson Hole Conference, which had attracted significant market attention, was effectively a 'declaration of interest rate cuts,' and maintained its view that the timing of South Korea's rate cut would remain as previously expected (October).
Yoon Yeo-sam, a researcher at Meritz Securities, said, "We maintain our stance that the domestic rate cut is expected in October as before, with one cut within this year."
Researcher Yoon explained, "Despite the August Monetary Policy Committee's 'soft exterior, strong interior' tone and the strengthened easing stance in the communication and forward guidance, we decided to maintain our previous opinion considering the cautious tone reflected in the Bank of Korea governor's remarks." This is because the August MPC statements focused on one rate cut within the year rather than the timing being in October or November.
Researcher Yoon analyzed, "As long as the expectation of a 2.75% rate cut by the first half of 2025 is maintained, there will be no significant change in the overall buying sentiment," adding, "Any further decline in government bond yields in the 2% range is a short-term burden."
Yoon emphasized, "If the Federal Open Market Committee (FOMC) in September only cuts by 25 basis points, there will be an opportunity to buy 10-year government bonds cheaply at around 3.1%," and stressed, "Despite the lack of price merit, the 'dense forest lion' strategy remains valid throughout the rest of this year."
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