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August 2023 Financial Overview: U.S. Treasury & KOSPI Shifts

Photo by Anna Evlanova / Unsplash

SEOUL, South Korea - According to the Bank of Korea, August 2023 saw significant shifts in financial markets, from rising Treasury yields to bank lending patterns, demonstrating global markets' complex and interconnected dynamics.

Why it matters:

August 2023 illustrated critical fluctuations in the financial space, shedding light on the intricate web of global market dynamics.

The Key Points.

  • US Treasury yields showed an upward trend, driven mainly by the Federal Reserve's monetary policy decisions and factors affecting the supply of government bonds.
  • The KOSPI showed a downward trend, influenced by Fed policy and uncertainties in the Chinese economy.
  • Bank loans to households and the corporate sector in KRW increased in August, highlighting a changing landscape in lending behavior.
  • In contrast to the decline in July, there was significant growth in bank deposits.

The Details

  • US Treasury dynamics: Yields rose, driven by the Federal Reserve's expectations of further monetary tightening and factors related to the supply and demand for Treasury securities.
  • KOSPI Movements: The KOSPI index declined, mainly due to ongoing concerns about the Fed's monetary policy adjustments and potential risks in China's economic sector.
  • Bank Lending Patterns: Bank loans to households increased to KRW +6.9 trillion in August from KRW +5.9 trillion in July. Lending to the corporate sector continued the trend from July, showing KRW +8.2 trillion in August, down slightly from KRW +8.7 trillion.
  • Deposit behavior: Banks recorded a notable increase in deposits in August, shifting from a decline of KRW -23.1 trillion in July to a rise in KRW +27.9 trillion.
  • Asset management trends: Assets managed by financial institutions showed slower growth in August, increasing only KRW +2.4 trillion, down sharply from KRW +18.8 trillion in July.
  • Interest rate trends: Data from 2020 to September 2023 showed a stable increase in key interest rates, such as the 3-year and 10-year government bonds and the 10-year U.S. Treasury bond. Meanwhile, the KOSPI index fell to 2,537 in September from 2,633 in July.
  • Corporate Financing: In August, bank loans to corporations grew steadily, in line with the pattern in July. However, corporate bonds saw net redemptions, influenced by seasonal factors and alternative sources of financing such as bank loans.
  • Flow of funds: A shift was observed in August as banks shifted from KRW -23.1 trillion in July to KRW +27.9 trillion in August in deposits. At the same time, the growth rate of corporate assets under management slowed.