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.