A large majority of bond market experts forecast that the Bank of Korea (BOK) will keep its benchmark interest rate unchanged at the Monetary Policy Board meeting scheduled for April 17. Analysts say the central bank is unlikely to lower rates hastily due to heightened uncertainty stemming from U.S. President Donald Trump’s trade policy. However, bond yields are expected to decline amid rising recession fears and growing demand for safe-haven assets.
According to the Korea Financial Investment Association (KOFIA) on April 15, the Bond Market Survey Index (BMSI) for May 2025 rose 10.4 points from the previous month to 113.5. The BMSI, calculated through a survey of bond market participants, is interpreted as follows: a reading above 100 indicates a positive outlook for bond prices (and thus lower yields), while a reading below 100 suggests deteriorating sentiment.
“the data shows that investor sentiment improved from the previous month, reflecting heightened concerns over global supply chain instability and domestic recession risks, which increased demand for safer assets,” said a KOFIA official.
The interest rate outlook BMSI surged from 104.0 in April to 131.0 in May. The share of respondents expecting bond yields to rise dropped by 6 percentage points to 16%, while those anticipating a decline jumped by 21 percentage points to 47%.
Despite the expected decline in market yields, most survey participants expect the base rate to remain unchanged. According to the survey, 88% of respondents anticipate that the BOK will keep the base rate steady in April, nearly doubling from 45% in the previous month. Only 12% expect a rate cut.
“The growing expectation of a rate hold reflects increased concerns over exchange rate volatility and household debt, despite significant downside pressures on the economy stemming from U.S. tariff policies,” KOFIA explained.
Concerns over deflation also grew. The share of respondents predicting a drop in prices increased by 5 percentage points to 12%, while those expecting inflation decreased by 4 percentage points to 18%. The inflation BMSI rose from 85.0 in April to 94.0 in May.
Amid rising U.S.-China tariff tensions, expectations for a decline in the Korean won also increased. The proportion of respondents anticipating a weaker exchange rate rose by 7 percentage points from 37% to 44%, while those forecasting a stronger won rose slightly by 1 percentage point to 16%. The exchange rate BMSI increased by 6 points from 122.0 to 128.0.
“The intensification of the U.S.-China tariff conflict significantly increased volatility in the exchange rate, and both upward and downward expectations have risen. However, the number of respondents expecting a weaker won grew at a faster pace,” the KOFIA official added.
The survey was conducted between April 4 and April 9 with responses from 100 bond market professionals. The sample included 22 fund managers and traders, 3 brokers and investment bankers, 33 analysts and economists, and 42 others involved in the fixed-income market.
A large majority of bond market experts forecast that the Bank of Korea (BOK) will keep its benchmark interest rate unchanged at the Monetary Policy Board meeting scheduled for April 17. Analysts say the central bank is unlikely to lower rates hastily due to heightened uncertainty stemming from U.S. President Donald Trump’s trade policy. However, bond yields are expected to decline amid rising recession fears and growing demand for safe-haven assets.
According to the Korea Financial Investment Association (KOFIA) on April 15, the Bond Market Survey Index (BMSI) for May 2025 rose 10.4 points from the previous month to 113.5. The BMSI, calculated through a survey of bond market participants, is interpreted as follows: a reading above 100 indicates a positive outlook for bond prices (and thus lower yields), while a reading below 100 suggests deteriorating sentiment.
“the data shows that investor sentiment improved from the previous month, reflecting heightened concerns over global supply chain instability and domestic recession risks, which increased demand for safer assets,” said a KOFIA official.
The interest rate outlook BMSI surged from 104.0 in April to 131.0 in May. The share of respondents expecting bond yields to rise dropped by 6 percentage points to 16%, while those anticipating a decline jumped by 21 percentage points to 47%.
Despite the expected decline in market yields, most survey participants expect the base rate to remain unchanged. According to the survey, 88% of respondents anticipate that the BOK will keep the base rate steady in April, nearly doubling from 45% in the previous month. Only 12% expect a rate cut.
“The growing expectation of a rate hold reflects increased concerns over exchange rate volatility and household debt, despite significant downside pressures on the economy stemming from U.S. tariff policies,” KOFIA explained.
Concerns over deflation also grew. The share of respondents predicting a drop in prices increased by 5 percentage points to 12%, while those expecting inflation decreased by 4 percentage points to 18%. The inflation BMSI rose from 85.0 in April to 94.0 in May.
Amid rising U.S.-China tariff tensions, expectations for a decline in the Korean won also increased. The proportion of respondents anticipating a weaker exchange rate rose by 7 percentage points from 37% to 44%, while those forecasting a stronger won rose slightly by 1 percentage point to 16%. The exchange rate BMSI increased by 6 points from 122.0 to 128.0.
“The intensification of the U.S.-China tariff conflict significantly increased volatility in the exchange rate, and both upward and downward expectations have risen. However, the number of respondents expecting a weaker won grew at a faster pace,” the KOFIA official added.
The survey was conducted between April 4 and April 9 with responses from 100 bond market professionals. The sample included 22 fund managers and traders, 3 brokers and investment bankers, 33 analysts and economists, and 42 others involved in the fixed-income market.