Government Bond Yields Rise Together... Three-Year Bonds Close at 2.441% Per Annum

10-year Bond Yield Rises by 5.9bp

The Bank of Korea building. Bank of Korea

On September 19, both short- and long-term government bond yields rose across the board, influenced by easing concerns over weak U.S. employment data and hawkish remarks from Bank of Korea Governor Rhee Changyong, who expressed a preference for monetary tightening. Bond yields and prices move inversely, so a rise in yields indicates a fall in prices.

On this day in the Seoul bond market, the yield on three-year government bonds closed at 2.441% per annum, up 3.8 basis points (1bp=0.01 percentage points) from the previous trading day. The five-year and two-year bonds rose by 3.9bp and 2.5bp, closing at 2.583% and 2.395% per annum, respectively.

The yield on ten-year bonds rose by 5.9bp to 2.815% per annum. The twenty-year bond yield climbed by 3.5bp to 2.793% per annum. The thirty-year and fifty-year bond yields increased by 2.6bp and 2.4bp, reaching 2.693% and 2.568% per annum, respectively.

First, the movement in government bond yields appears to have been influenced by overnight U.S. employment data. The U.S. Department of Labor announced overnight that new unemployment claims for the week of September 7-13 totaled 231,000, a decrease of 33,000 from the previous week.

This figure is lower than the market forecast of 240,000. Since the U.S. Federal Reserve uses employment indicators as a key criterion for the pace of interest rate cuts, analysts believe that the easing of concerns over weak employment led to the rise in yields.

Baek Yunmin, a researcher at Kyobo Securities, analyzed, "While bond yields were influenced by the previous day's weakness in U.S. Treasury yields, the scope for further gains was limited by the positive U.S. economic indicators."

Additionally, Governor Rhee's remarks also affected market sentiment. On September 18 (local time), following a special lecture at the International Monetary Fund (IMF) headquarters in Washington, D.C., Governor Rhee stated during a conversation with IMF Managing Director Kristalina Georgieva, "When considering the neutral rate, we must take overall financial stability into account," and added, "This is why I believe it is necessary for Korea to maintain a slightly higher interest rate than other countries."

He continued, "Unlike large economies with strong and resilient financial sectors, financial stability is a very critical issue for countries like Korea," and reiterated, "When considering the neutral rate, overall financial stability must be taken into account."

Such remarks have dampened market expectations for a Bank of Korea rate cut. In fact, on this day, foreign investors made a net purchase of 1,109 contracts of three-year government bond futures, while making a net sale of 16,757 contracts of ten-year government bond futures.

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