South Korea Inflation Touched 9 Year High Triggering Rate Hike
CPI and Core CPI above target level of average 2.1% calling hike in bond yield
South Korean consumer price index (CPI) stayed at 2.6% YoY in August as prior month. While core CPI which excludes volatile energy and food prices stayed at 1.8% compared to earlier 1.7%. The rate is well above the inflation target level of average 2.1%.
Higher inflation is the enemy for fixed income securities which erodes future cash flow of bond’s coupon payments. Accordingly, yield went up with 5Y bond yield increased to 1.680 up by 0.30%. Higher yields also could lead to lower valuation for the equity asset class.
KOSPI index fell today by 26.67 points to 3179.39 (-0.85%) at Thailand time 13:08 hours.