South Korea’s 10Y Yield Remains Rangebound

South Korea’s 10-year government bond yield climbed to around 3.65%, the highest in nearly 2 years, as market expectations for interest rate cuts faded and funding costs rose. With investors pricing in a slower path to easier monetary policy, demand for longer-dated bonds weakened, pushing yields higher. Domestic firms are favoring shorter-term debt, with LG Energy Solution considering delaying a $700 million bond sale amid rising yields. Over the weekend, attention turned to President Trump’s nomination of Kevin Warsh as Fed chair, adding uncertainty to US monetary policy and global markets. At the same time, the won’s persistent weakness has contributed to higher domestic yields. Heavy overseas securities investment by residents, totaling $129.4 billion between January and November last year has created a supply-demand imbalance in the FX market. This tightening of local liquidity has placed additional upward pressure on borrowing costs.

South Korea’s 10-year government bond yield climbed to around 3.47%, reaching its highest level since June 2024, after the central bank held its key rate steady and indicated that the current easing cycle has likely concluded. The decision came as policymakers prioritized financial stability, with the won hovering near sixteen-year lows. Following a cumulative 100 basis points of rate cuts since October 2024, Governor Rhee Chang-yong signaled a prolonged pause in easing amid geopolitical uncertainties and persistent capital outflow risks. The Bank of Korea further reinforced this stance by removing language from its statement that had previously suggested potential future rate cuts. Analysts have now pushed back expectations for the next rate cut to the first quarter of 2027, from earlier predictions of the first quarter of this year, as authorities are expected to continue efforts to stabilize the won amid challenging external conditions.

South Korea’s 10-year government bond yield hovered around 2.87% in late October, staying within its recent range as investors weighed the Bank of Korea’s cautious stance against lingering US trade uncertainty. The central bank kept its benchmark rate at 2.5%, extending the pause in its easing cycle since May amid concerns over rising household debt. The move also followed tighter property rules in Seoul to curb borrowing. Policymakers cited stable inflation and an improving outlook while monitoring housing and debt risks. Domestic demand is also recovering, though the BOK warned that US trade talks and tariffs could weigh on growth. A government official reported “partial progress” in negotiations with the US as both sides work to resolve differences over Seoul’s $350 billion investment pledge under the July trade deal. The ongoing trade uncertainty continued to weigh on risk sentiment.