Bond Market Bullish As Middle East Risks Rise
The Ministry of Economy and Finance conducted a public tender for three-year treasury bonds on Jan. 6 and the bonds worth a total of 2.2 trillion won were sold at a weighted average rate of 1.26 percent. Bidders came up with 6.48 trillion won.
The bidding finished at one basis point higher than the base money rate and this has to do with the ongoing geopolitical risks related to the Middle East. “The bond market was bearish after the recent trade agreement between the United States and China,” said Yuanta Securities, adding, “However, the market is now bullish again with regard to the risks in the Middle East.”
At the public tender for 30-year treasury bonds conducted that day, bonds worth 2,694 billion won were sold at a weighted average rate of 1.62 percent, approximately six billion won short of the planned volume.
Bond funds and bond ETFs benefitted from the Middle East issues, too. With investors shunning risky assets, bond funds attracted 284.5 billion won on Jan. 6 alone while 462.4 billion won flowed out of domestic stock funds. As for ETFs, KODEX 200 U.S. Treasury Notes Balanced, TIGER 10-year U.S. Treasury Note Futures, and KODEX Ultra T-bond Futures edged up 0.27 percent, 0.22 percent, and 0.17 percent, respectively.