Bond Market Sentiment Improves in July… “Impact of Ceasefire Agreement”
Sentiment on Exchange Rates and Inflation Worsens Compared to Previous Month
Market sentiment in the bond market improved compared to the previous month due to the effects of the ceasefire agreement between the United States and Iran.
The Korea Financial Investment Association announced the results of a survey conducted from June 8 to 11 among 100 professionals involved in bond holdings and management, releasing the ‘July 2026 Bond Market Indicators’ on the 17th.
The Bond Market Survey Index (BMSI) stood at 85.1, up by 4.1 percentage points from the previous month. If the BMSI is below 100, it indicates expectations of a decline in bond prices (rise in yields) and suggests that market sentiment is subdued. Conversely, a BMSI above 100 signals expectations of rising bond prices (falling yields), reflecting positive market sentiment.
The association explained, “In July, bond market sentiment improved compared to the previous month amid expectations for eased geopolitical risks following the U.S.-Iran ceasefire agreement.”
The proportion of respondents expecting interest rates to rise remained unchanged from the previous month at 45%, while the ratio of those expecting a decline in rates increased by 4 percentage points to 16%. The association interpreted, “The increase in respondents anticipating lower rates compared to the previous month is due to expectations that the surge in government bond yields following the ceasefire agreement will subside.”
The inflation-related BMSI worsened to 50.0 from 53.0 the previous month. The share of respondents expecting inflation to rise increased by 5 percentage points to 52%, while those anticipating lower inflation accounted for 2%. The continued concerns over rising prices are attributed to prolonged high exchange rates and oil prices.
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With the exchange rate remaining consistently in the 1,500 won range, and external factors such as the release of U.S. economic indicators coming into play, the proportion of respondents expecting a rise in the exchange rate increased. Specifically, 24% of respondents predicted higher exchange rates, up by 6 percentage points from the previous month. Meanwhile, the percentage of those expecting a decrease in the exchange rate was 15%, down by 1 percentage point from the previous month.
This content was produced with the assistance of AI translation services.
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