South Korea's CD Rates Remain Flat at 2.91% After 25bp Rate Hike, Spreads Hit Historic Lows

According to Yonhapinfomax on July 21, South Korea's 91-day CD rates remained flat at 2.91% despite the central bank raising its benchmark rate by 25 basis points to 2.75% the previous week. Kookmin Bank and Hana Bank both issued CDs at this rate on July 20, showing minimal market response to the rate increase.

The spread between CD rates and AAA-rated three-month bank bonds narrowed to just 13.5 basis points, compared with 22.4 basis points for bank bonds over government bonds. Bond traders noted the disconnect is unusual, with CD spreads versus overnight index swaps (OIS) at only around 6 basis points, well below the typical 20 basis points.