Korean Won Interest Rate Swaps Decline Across All Maturities, 2- and 3-Year Rates Down 5.75bp

The Korean won interest rate swap (IRS) rates fell across all maturities on the 19th, pressured by foreign demand for receiving swaps. The 2-year and 3-year rates each decreased by 5.75 basis points. As of 4:28 PM in the Seoul bond market, the 1-year IRS rate was at 3.4375%, down 3.50 basis points, the 5-year rate was at 3.9625%, down 5.50 basis points, and the 10-year rate was at 4.1050%, down 4.25 basis points. The foreign demand acted as a factor for the decline in rates, particularly with strong buying interest in the 2-year segment. The IRS is an over-the-counter derivative that exchanges fixed and floating interest rates, reflecting market interest rate expectations and the risk management needs of bond-holding institutions. Currency swap (CRS) rates also fell across all maturities, with the 1-year CRS rate at 3.2650%, down 3.00 basis points, the 5-year at 3.5950%, down 2.00 basis points, and the 10-year at 3.5350%, down 2.00 basis points. The decline in both IRS and CRS has reduced the swap basis inversion. The 1-year inversion narrowed by 0.50 basis points to -17.25 basis points, while the 5-year inversion narrowed by 3.50 basis points to -36.75 basis points. This trend is related to the volatility in the Korean won swap market, and the IRS is not a direct indicator of Bitcoin or Ethereum prices.

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