October treasury bond interest rates fall due to falling oil prices and foreign futures purchases

Last October, interest rates on government bonds fell overall due to a drop in international oil prices and foreigners' buying of government bond futures.

According to the 'Oct 2026 OTC Bond Market Trends' published by the Korea Financial Investment Association on the 10th, West Texas Intermediate (WTI) crude oil fell below $100 per barrel, the won/dollar exchange rate stabilized, and the pressure to increase interest rates was eased, focusing on long-term bonds.

At the beginning of the month, when there was a holiday, short- and medium-term interest rates rose slightly in conjunction with global interest rates and international oil price trends, but ultra-long-term interest rates showed strength as 30-year Treasury bond bids were successfully digested.

In October, U.S. Treasury yields showed high volatility, especially long-term bonds, due to rising inflation pressure in the service industry, European financial instability, and the burden of large-scale corporate bond issuance, which also affected Treasury bond yields. The 30-year U.S. Treasury bond interest rate rose to 5.70%, the highest level since 2022, but the strength of Treasury bond yields expanded as long-term U.S. interest rates calmed down and large-scale purchases of Treasury futures by foreigners continued.

At the end of the month, the Bank of Korea's Monetary Policy Committee and the U.S. Federal Reserve System's (Fed) Federal Open Market Committee (FOMC) froze policy interest rates, leading to an overall decline in Treasury bond yields. In addition, the preference for safe assets continues due to the weakness of global technology stocks, and government bond interest rates ended lower in all sectors in October.

The size of bond issuance in October was 91 trillion won, an increase of 4.5 trillion won compared to the previous month. Although the issuance of treasury bonds and corporate bonds decreased, the issuance of special bonds and financial bonds increased significantly. The net issuance amount in October was 33.1 trillion won, and the total issuance balance was 3219.1 trillion won.

Corporate bond issuance amounted to 7.4 trillion won, down 3.4 trillion won from the previous month. The credit spread (additional interest rate compared to government bonds) for the AA- rating was the same as the previous month, and for the BBB- rating, it slightly expanded compared to the previous month.

Last month, the amount of corporate bond demand forecasts recorded a total of 29 cases, 2.055 trillion won, down 1.556 trillion won from 3.611 trillion won in the same month last year.

The total participation amount in demand forecasting was KRW 11.45 trillion, a decrease of KRW 9.421 trillion from the same month last year, and the participation rate was 557.4%, a 20.6 percentage point decrease.

The participation rate by grade was 632.2% for grade AA or higher and 390.2% for grade A.

Over-the-counter bond trading volume in October was recorded at KRW 434.6 trillion, down KRW 14.1 trillion from the previous month. The average daily trading volume was 21.7 trillion won, a decrease of 700 billion won compared to the previous month.

Net purchases by individuals in October amounted to 2.7135 trillion won, down 1.3 trillion won from the previous month.

Foreign net purchases amounted to KRW 8.452 trillion, an increase of KRW 9.6 trillion from the previous month, turning from net selling to net buying.

The Korea Financial Investment Association explained, "As the currency swap (CRS) interest rate fell rapidly from the beginning of the month and the swap basis expanded, the incentive for foreigners to arbitrage transactions was strengthened. In particular, the buying trend of foreign bonds, especially mid- to long-term bonds, was maintained due to the expansion of foreign bond futures purchases and the inflow of funds following inclusion in the World Government Bond Index (WGBI) at the end of the month."

In October, the yield on certificates of deposit (CD) recorded 3.32%, up 10 basis points from the previous month, due to rising pressures on domestic and foreign interest rates, changes in procurement methods such as banks' preference for issuance of long-term CDs, and rising interest rates in the CD secondary market.

The total CD issuance amount in October was 7.8 trillion won, an increase of 2.5 trillion won compared to the previous month.

Last month, four new Qualified Institutional Investors (QIB) bonds were registered, worth 1.7365 trillion won.