South Korea CD 91-Day Yield

KRCD is the raw series recording the quoted 91-day certificate-of-deposit yield without any transformation, namely the annualized rate of return on a negotiable 91-day fixed-maturity money-market deposit instrument. As a yield it is the discount rate that equates the instrument's price to its single terminal cash flow at maturity. This yield-to-maturity construct originates in mapping a fixed-income price to its cash-flow-weighted return and was later generalized to the full term structure of zero-coupon rates (Macaulay 1938; Fisher and Weil 1971).

The 91-day tenor places this quote near the short end of the interest-rate term structure. Its forward-rate decomposition was defined and then made operational as a smooth function recoverable from market prices (Hicks 1939; McCulloch 1971, 1975; Vasicek and Fong 1982; Nelson and Siegel 1987; Svensson 1994). Its daily construction was standardized and evaluated across competing methods (Gürkaynak, Sack, and Wright 2007; Bliss 1997).

The certificate of deposit is a term money-market claim distinct from secured collateralized financing, which carries its own specialness, and from the overnight unsecured interbank rate (Duffie 1996; Hamilton 1996; Furfine 1999). Its level is anchored by the policy operating-target framework (Borio 1997; Bindseil 2004; Bartolini, Bertola, and Prati 2002).

KRED applies no transformation to the quoted 91-day certificate-of-deposit yield and stores it daily exactly as observed, performing no rescaling, deflating, smoothing, or annualizing. The series therefore exists by the measurement conventions of money-market yield quotation rather than by any KRED computation. Its underlying basis is the yield-to-maturity framework whereby a fixed-maturity instrument's price implies a single annualized discount rate, a construct that was formalized and then generalized to the zero-coupon term structure (Macaulay 1938; Fisher and Weil 1971).

A 91-day money-market yield is a point estimate of that term structure at the short end. Its smooth recovery from market prices developed through the cubic-spline discount function, the exponential splines, the parsimonious level-slope-curvature form, and the extended forward-rate form (McCulloch 1971, 1975; Vasicek and Fong 1982; Nelson and Siegel 1987; Svensson 1994). The daily operational construction was codified and the competing estimators were compared (Gürkaynak, Sack, and Wright 2007; Bliss 1997).

Because the certificate of deposit is an unsecured term claim rather than secured repo financing, its quoted rate is read against the secured-rate benchmark and the overnight unsecured measurement (Duffie 1996; Hamilton 1996; Furfine 1999). The conventions linking such money-market rates to the policy operating target follow the operating-procedure literature (Borio 1997; Bindseil 2004; Bartolini, Bertola, and Prati 2002). No seasonal adjustment is applied, consistent with the series carrying no seasonal structure.

The 91-day certificate-of-deposit yield is a money-market price through which the monetary-policy operating target is transmitted to private borrowing costs. The operating-procedure framework defines how an operating-target rate is pinned by open-market operations and standing facilities (Borio 1997; Bindseil 2004). The mechanism by which day-to-day operations steer the short rate around that target has been modeled separately (Bartolini, Bertola, and Prati 2002).

Because this quote sits at the short end of the term structure, its movements separate expected future short rates from term and liquidity premia. The foundation of that forward-rate and liquidity-premium decomposition is already in place (Hicks 1939). This reading is sharpened by term-structure measurement (McCulloch 1971; Nelson and Siegel 1987; Svensson 1994; Gürkaynak, Sack, and Wright 2007).

The spread of this unsecured term deposit rate over the secured collateralized rate and the overnight unsecured rate is informative about funding conditions and counterparty risk (Duffie 1996; Hamilton 1996; Furfine 1999). The duration sensitivity of any claim priced off this yield follows the yield-to-maturity and duration methods (Macaulay 1938; Fisher and Weil 1971).

As a benchmark term money-market rate, the 91-day certificate-of-deposit yield is widely embedded as the reference index for floating-rate loans and interest-rate swaps. Claims that reset off it are priced and hedged using the yield-to-maturity and duration machinery (Macaulay 1938; Fisher and Weil 1971).

Discounting and curve construction for such instruments place this quote on the zero-coupon curve, which is recovered from market prices (McCulloch 1971, 1975; Vasicek and Fong 1982; Nelson and Siegel 1987; Svensson 1994). How the short-maturity point is fitted is governed by the daily off-the-run construction and the estimator comparison (Gürkaynak, Sack, and Wright 2007; Bliss 1997).

Relative-value and funding desks read the certificate-of-deposit rate against the secured repo benchmark and the overnight unsecured rate (Duffie 1996; Hamilton 1996; Furfine 1999). Its level relative to the policy operating target follows the implementation frameworks (Borio 1997; Bindseil 2004; Bartolini, Bertola, and Prati 2002).

The front-end curve built around this quote implies the expected path of short rates priced by the market. Its forward-rate content has already been identified (Hicks 1939).

On the 7,982 daily observations spanning 1995-01-03 to 2026-06-10, fit with a constant and trend, the unit-root battery does not agree on the order of integration of the ninety-one-day certificate-of-deposit rate. The augmented Dickey-Fuller test of Dickey and Fuller (1979), in the lag-augmented form of Said and Dickey (1984) with the lag length of Ng and Perron (2001), rejects the unit root at p = 0.0288, while the nonparametric Phillips and Perron (1988) test fails to reject it at p = 0.331 and the Kwiatkowski et al. (1992) test rejects trend stationarity at p < 0.01, so the opposite-null pair does not resolve and no clean order of integration is assigned. The GLS-detrended escalation of Elliott, Rothenberg, and Stock (1996) is run for this ambiguous outcome and does not reject a unit root at p = 0.193, but under the house protocol it confirms the augmented Dickey-Fuller leg rather than overturning the disagreement, so the reading stays ambiguous.

Because the level is integrated, the mean-shift and serial-correlation diagnostics are run on the first difference, the stationary object those procedures require, since a break search or a portmanteau on an integrated level would spuriously segment and read near-unit autocorrelations (Bai and Perron 1998; Perron 1989). The multiple-break procedure of Bai and Perron (1998), computed by the dynamic-programming algorithm of Bai and Perron (2003), finds no break in the mean of the differenced series, consistent with the parameter-instability inference of Andrews (1993). The Ljung and Box (1978) portmanteau statistic, refining the original Box and Pierce (1970) form, is computed on the first difference and rejects the white-noise null at lags 10 and 20, with Q = 1817.84 and Q = 1871.30 and p = 0.000 and p = 0.000, and the automatic portmanteau test of Escanciano and Lobato (2009) concurs with a statistic of 5.25 at p = 0.022.

The series is daily and has no low-integer seasonal period, so the seasonal-unit-root machinery of Hylleberg et al. (1990) and the Canova and Hansen (1995) seasonal-stationarity test are inapplicable and are deliberately not run, the degeneracy of the seasonal auxiliary regression at a daily period being the standard ground (Beaulieu and Miron 1992; Ghysels and Osborn 2001).