Due to Expectations of Interest Rate Cuts... 3-Year Government Bond Falls Below 3% for the First Time in 2 Years and 2 Months (Comprehensive)

As expectations for a base interest rate cut grow, government bond yields have collectively declined.

On the 29th in the Seoul bond market, the 3-year government bond yield closed at an annual rate of 2.978%, down 4.6 basis points (1bp = 0.01 percentage points) from the previous trading day.

This is the first time in 2 years and 2 months that the 3-year government bond yield has fallen to the 2% range since May 30, 2022 (2.942%).

The 10-year yield dropped 6.2bp to 3.046% annually. The 5-year and 2-year yields fell 5.5bp and 4.3bp, closing at 2.990% and 3.057% respectively.

Government bond yields have been continuously declining amid growing expectations of a U.S. base interest rate cut. The June core Personal Consumption Expenditures (PCE) index released last week showed a 0.2% month-on-month increase, in line with market expectations, confirming price stability and contributing to the decline in market interest rates.

The market expects the U.S. Federal Reserve (Fed) to cut the base interest rate in September. According to the FedWatch indicator by the Chicago Mercantile Exchange (CME) Group, the futures market currently reflects a 100% probability of a rate cut in September.

Domestic price stability has also increased the possibility of a base interest rate cut by the Bank of Korea, influencing the decline in yields. The market anticipates that a minority opinion favoring a rate cut could emerge at the Bank of Korea's Monetary Policy Committee meeting next month. Following a minority opinion in August, there is speculation that the base interest rate may be lowered around October.

This content was produced with the assistance of AI translation services.