Institution: South Korean bond market factors in excessive rate hike expectations, short-term bonds present a buying opportunity

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Golden Finance reports that on May 26th, NH Amundi Asset Management stated that the Korean bond market has priced in excessive expectations of central bank rate hikes, creating buying opportunities for short-term bonds. The firm's executive director, Han Xiu-ri, said in an interview that one- to two-year government bonds are "cheap" at current levels, and pointed out that the swap market unrealistically prices in multiple rate hikes of 25 basis points by the first half of 2027. "Before the rate hike cycle even begins, the market has priced in four to five hikes, which is very unusual," Han Xiu-ri said. Looking ahead to the next policy meeting, Han Xiu-ri said that the key focus will be the Bank of Korea's forecast for GDP in 2027, to gauge the sustainability of the AI chip surge, rather than its short-term outlook for this year. He expects the central bank to forecast 1.9% economic growth in 2027 and to raise rates once in July, then keep rates steady for the long term.
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