▲ Bonds (The photo above is not related to the content of the article.)
Evaluations in the bond market are mixed regarding the government bond issuance plan for November.
While some analyses suggest that because the competitive bidding scale did not decrease compared to October and the proportion of ultra-long-term bonds increased, it could act as a factor driving up ultra-long-term interest rates, other opinions emphasize that the trend of reduced issuance has continued following October.
However, assessments indicate that immediate market interest has shifted from domestic supply and demand to overseas variables due to earnings shocks among major U.S. tech companies leading the artificial intelligence (AI) boom and the resulting risk-averse sentiment.
According to the Seoul bond market on November 1, the competitive bidding scale for November treasury bonds announced by the Ministry of Economy and Finance last week is 12 trillion won, the same as in October.
The scale of treasury bond buybacks decreased from 3.5 trillion won in October to 2 trillion won in November.
KB Securities evaluated that the November competitive bidding scale was larger than the 10 to 11 trillion won expected by the market.
Pointing out in particular that the issuance scale for 30-year bonds increased from 1.8 trillion won in October to 2 trillion won in November, it forecasted that the interest rate spread between 30-year and 10-year bonds would widen.
A fixed-income trader at a securities firm also said, "The treasury bond issuance plan itself was somewhat of a bearish factor for the bond market," adding, "The volume of ultra-long-term bonds was larger than expected, and even for the market as a whole, it was a factor that could push up interest rates by 1 to 2 bps."
However, the trader explained, "As U.S. stocks plummeted and bonds were heavily influenced by a risk-averse atmosphere, domestic supply and demand factors were temporarily pushed aside."
On the other hand, some opinions attached significance to the fact that authorities continued to reduce issuance volumes even though treasury bond yields fell significantly following the reduction in issuance volumes in October.
During the month of October, the yield on 3-year treasury bonds fell by about 30 bps, while yields on 10-year and 30-year bonds each dropped by around 40 bps, receiving the largest downward correction during the protracted upward interest rate trend that has continued since May of last year.
Kang Seung-won, an analyst at NH Investment & Securities, said, "Even if the issuance volume in November is the same as in October, we must also look at the fact that volumes were already reduced in October," noting that the authorities' willingness to manage treasury bond supply and demand can be read from this.
Cho Yong-gu, an analyst at Shinyoung Securities, also evaluated, "The reduction in issuance itself is roughly in line with market expectations," making it difficult to view the treasury bond issuance plan as a clear bearish factor.
He diagnosed that recently, the stock market is driving direction rather than supply and demand inherent to the bond market, and stock price trends are spilling over into bond yields.
Experts stated that in situations where recent concerns over AI facility investment stimulate risk-averse sentiment, upward momentum in treasury bond yields could be limited.
Im Jae-gyun, an analyst at KB Securities, forecasted that even if interest rates rebound, buying pressure will flow in.
Citing the fact that the third-quarter cash flow of Samsung Electronics and SK Hynix increased by more than 20 trillion won compared to the second quarter, the analysis suggests there are expectations regarding the two companies' execution of funds in the bond market.
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