The message the market wants..! Rate cut? Hold? Could hikes even come? Has the domestic bond market peaked? | Koo Hye-young, Yeo Do-eun, Heo Jae-mu [Morning N Investment]

Summary

Koo Hye-young of NH Investment & Securities discusses the Korean and global bond markets. She argues Korean government bond yields likely peaked because a Bank of Korea hiking cycle is unlikely, while US long-end yields stay range-bound due to inflation risk. She favors cash-flow-generating bonds, remains constructive on Brazilian local bonds and currency, and expects the won to stay weak in a higher USD/KRW new-normal range.

• Korean bond selloff was tied to fears of a BOK policy shift; a long freeze is seen as more likely.
• Korean 10-year yield may fall about 20bp if hike fears ease; an extra budget is the main risk.
• US long-end Treasury yields are seen range-bound; directional duration bets are unattractive.
• Bond strategy shifts toward contractual cash flow and frequent coupon reinvestment.
• Brazilian bonds and BRL are favored on rare-earth investment, credit improvement, and rate-cut expectations.
• Brazil's H2 election and possible Trump interference are key volatility risks.
• USD/KRW is seen in a 1,400 new-normal range; increasing foreign-currency asset allocation is advised.