October bond market index rises 0.2 points from previous month

Interest rate outlook BMSI holds steady at 99.0

[Provided by the Korea Financial Investment Association]
[Provided by the Korea Financial Investment Association]

Bond market sentiment turned cautious in October, a new survey showed.

The composite Bond Market Sentiment Index, or BMSI, rose to 89.7 in October from 89.5 the previous month, according to the Korea Financial Investment Association. The modest gain reflected a mix of domestic and external variables, including uncertainty over global monetary tightening and the possibility of a slower pace of domestic benchmark interest rate hikes.

The BMSI tracks the interest rate outlook and investment sentiment of bond market participants. A reading above 100 indicates that more participants expect interest rates to fall and bond prices to rise, while a reading below 100 signals that more participants anticipate rising rates and falling bond prices.

The interest rate outlook BMSI held steady at 99.0, unchanged from the previous month. The association said that ahead of the September FOMC meeting, upward pressure on global interest rates and downward pressure on consumer prices from won strength pulled in opposite directions, pushing up the share of respondents expecting rates to rise as well as those expecting them to fall compared with the previous month.

Respondents expecting higher interest rates rose to 22 percent from 16 percent the previous month, a gain of 6 percentage points. Those expecting lower rates also increased by 6 percentage points, climbing from 15 percent to 21 percent.

The consumer price BMSI improved, rising to 100.0 from 97.0 the previous month, signaling a more balanced outlook on inflation. South Korea's consumer price growth last month came in slightly below expectations, prompting more respondents to anticipate a decline in prices. At the same time, the continued rise in core inflation pushed up the share of respondents expecting prices to increase.

Respondents expecting higher consumer prices rose 4 percentage points to 13 percent from 9 percent the previous month. Those expecting lower prices increased 7 percentage points, from 6 percent to 13 percent.

The exchange rate BMSI climbed to 109.0, up 10.0 points from 99.0 the previous month, as the won continued to strengthen and an increase in dollar selling tied to strong exports reduced the share of respondents expecting the exchange rate to rise.

Respondents expecting the won-dollar rate to rise fell 10 percentage points to 4 percent from 14 percent the previous month. Those expecting it to remain flat increased 10 percentage points, from 73 percent to 83 percent.


moon@heraldcorp.com