14.03.04 : Changed the Position toward Almost Neutral

I changed the position of my portfolios in terms of duration and yield curve.
I mitigate both of duration and overweight on long end bonds to almost neutral against BM by short selling KTB 10yr futures (and buying some 3yr futures).

In fact, I am affected by net sell off in 3 and 10yr KTB futures by foreign investors for 4 consecutive days. But I focus on alive expectations about US recovery.

February ISM manufacturing index rose higher than expectation and last month's including new order index. And personal income and spending increase 0.3% and 0.4% from last month reapectively and they are higher than expectarions.

I think that downside risk for US economy remains, however, in short term, the pace of UST yields decline has been faster than economic views.

On the other hand, in Korea, CPI last month increased by 0.3% from a month earlier in line with the market expectation. Although in terms of YoY growth, it rose 1.0% only, annual adjusted number of month on month growrh was 3.6% meaning the momentum is not slow now.

As Ukraine woea diminish substantially, risky assets would outperform in short term in my view.

So I have a plan to wait for higher yields than current level. Well, I am slightly long the bonds rather than short on my long term view.

14.03.03 KTB market review : Next BOK Chairman : Dove or Hawk?

With increasing risks about Ukraine, Kospi and KRW started to weaken and KTB to strengthen at opening the market.
Weak exports data in Feb. underpinned bullish market for bonds. Daily average exports decreased below 2 bil. USD and this is recognized that worsening external indicators affected Korean exports economies.

However, bond yield declines were constrained due to the burden of level and rapid pace of drop recently.
Ahead of auctions of 3yr and 30yr treasuries, bond markets came back to last Friday's level.

In the afternoon, the candidate for next president of BOK, much important news for Korean monetary policy, announced by government. Investors have been expected new chairman to be likely follow government's stimulus policies with easing monetary stance. Nevertheless former vice president for BOK appointed the candidate for the next president, and then market sentiments changed to be weakening along with sell off KTB 3yr futures by foreign investors. They sold it by about 13 thousand contracts worth of 1.3 tril. won rapidly. As the result, markets turned to bearish and closed.

Although he is relatively neutral between hawks and doves, I think market expectations were excessively skewed toward dovish one. Someone concerns that strong sentiments about the bond market would wane sequentially.
But I ain't sympathetic about this. Indeed the expectation of additional policy rate cut could mitigate in short term, amplifying downside risk of local bond markets.

But we finally should focus on the external economies as decreased exports over last 2 months. US and China economic slowdown risks are coming and these would enhance bullish bond markets eventually, I think.