Standard Chartered Bank: Korean Treasury Bonds to outperform

Quotes from Standard Chartered Bank

• We expect KTBs to outperform, based on our rate-cut expectation in Q2. Their downward momentum halted in February and the 3Y KTB yield increased by 27bps to 2.48% from its low of 2.21% on 3 February. However, the yield fell again to 2.35% after Governor Lee's slightly dovish comment in February. 

• Given Korea's historically low inflation and current growth uncertainty, we see room for the yield to decline further from current levels.
  
  
  
• Given the record-low KTB 3Y yield - almost at the policy rate - and the unanimous 'no change' vote at the February MPC meeting, we expect any rally in short-end yields to be limited from here. However, medium- to longer-tenor rates will likely outperform on local factors and the global policy easing trend.