South Korea 10-Year Yield Lowest Since May
South Korea’s 10-year government bond yield fell to around 4% in late October, its lowest level since May, as expectations of reduced government bond issuance supported bond prices. The government may tap its planned Future Response Fund, financed by a semiconductor-driven tax windfall, to further reduce borrowing if yields rise sharply or market conditions worsen. Seoul plans to reduce net bond issuance by?12.5 trillion in 2027, while the fund is expected to receive?162.3 trillion next year, with roughly two-thirds remaining in reserves after planned allocations. The potential for further issuance cuts could provide additional support for government bonds and limit upward pressure on yields. However, persistent inflation and the Bank of Korea’s recent rate hikes remain upside risks to yields. BoK Governor Shin Hyun Song also recently pledged to maintain restrictive policy until inflation converges toward its 2% target.
South Korea’s 10-year government bond yield fell to around 4% in late October, its lowest level since May, as expectations of reduced government bond issuance supported bond prices. The government may tap its planned Future Response Fund, financed by a semiconductor-driven tax windfall, to further reduce borrowing if yields rise sharply or market conditions worsen. Seoul plans to reduce net bond issuance by?12.5 trillion in 2027, while the fund is expected to receive?162.3 trillion next year, with roughly two-thirds remaining in reserves after planned allocations.
The potential for further issuance cuts could provide additional support for government bonds and limit upward pressure on yields. However, persistent inflation and the Bank of Korea’s recent rate hikes remain upside risks to yields. BoK Governor Shin Hyun Song also recently pledged to maintain restrictive policy until inflation converges toward its 2% target.