More than 90% of bond market participants expect the Bank of Korea's Monetary Policy Committee to hold the base rate steady at its meeting on October 22.
The Financial Investment Association reported on October 20 that a survey conducted from October 12 to 15 among 100 professionals involved in bond holding and management found that 93% anticipate the base rate will remain unchanged this month. The remaining 7% expect an increase.
The association explained, "The prevailing expectation for a hold on the base rate reflects a desire to assess the effects of two consecutive rate hikes."
The survey included participants from 53 institutions. According to the 'November 2026 Bond Market Index' released by the association, the overall Bond Market Sentiment Index (BMSI) rose to 99.1, up 9.4 points from the previous month’s 89.7.
The BMSI is a measure of market sentiment based on survey responses. A reading above 100 indicates that more respondents expect bond prices to rise (and interest rates to fall), suggesting positive market sentiment, while a reading below 100 indicates a contraction in market sentiment.
The interest rate outlook BMSI increased to 123.0, up 24.0 points from the previous month’s 99.0.
Despite rising foreign interest rates, including French government bond yields, the increase in respondents expecting a decline in market rates is attributed to risk-averse sentiment due to adjustments in the domestic stock market and expectations for a hold on the U.S.-Korea base rates.
Those anticipating a decline in rates rose to 40%, an increase of 19 percentage points from the previous month’s 21%. Conversely, those expecting an increase fell to 17%, down 5 percentage points from 22%, while those predicting stability decreased to 43%, down 14 percentage points from 57%.
Sentiment regarding inflation and exchange rates in the bond market worsened compared to the previous month.
The inflation BMSI dropped to 93.0, down 7.0 points from the previous month’s 100.0. This decline follows the U.S. Consumer Price Index (CPI) for September exceeding expectations, coupled with concerns over rising international oil prices due to renewed tensions in the Middle East and persistent worries about core inflation.
Respondents expecting inflation to decrease fell to 3%, down 10 percentage points from the previous month’s 13%. Those anticipating stability increased to 87%, up 13 percentage points from 74%, while those expecting inflation to rise decreased to 10%, down 3 percentage points from 13%.
The exchange rate BMSI fell to 98.0, down 11.0 points from the previous month’s 109.0.
Increased geopolitical tensions in the Middle East and heightened volatility in the domestic stock market contributed to a rise in respondents expecting an increase in exchange rates.
Those anticipating an increase in exchange rates rose to 13%, up 9 percentage points from the previous month’s 4%. Respondents expecting a decrease fell to 11%, down 2 percentage points from 13%, while those predicting stability decreased to 76%, down 7 percentage points from 83%.
Meanwhile, the Industrial Production Index BMSI rose to 94.0, up 19.0 points from the previous month’s 75.0, and the Consumer Sentiment Index BMSI increased to 100.0, up 3.0 points from 97.0.
* This article has been translated by AI.
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