Treasury bond interest rates fall all at once... Impact of strong US government bonds (comprehensive)

(Seoul = Yonhap News) Reporter Kang Su-ji = On the 23rd, interest rates on government bonds fell all at once.

Last night, U.S. Treasury yields fell significantly due to an influx of safety-preferred purchases due to overinvestment in artificial intelligence (AI) and credit concerns. Net purchases of government bond futures by foreigners continued.

On this day, in the Seoul bond market, the three-year maturity treasury bond interest rate closed at 3.803%, down 3.7bp (1bp = 0.01% point) from the previous trading day.

The 10-year interest rate fell 5.5bp to 4.097% per annum. The 5-year and 2-year notes fell 3.5bp and 2.4bp, respectively, and closed at 3.948% and 3.760% per year.

The 20-year yield fell 4.0bp to 4.170% per annum. 30-year and 50-year notes fell 5.0bp and 4.3bp, respectively, recording an annual rate of 4.189% and 4.231%.

3-year Treasury bond futures closed at 103.15, up 7 ticks from the previous day, and 10-year Treasury bond futures closed at 107.13, up 34 ticks. Foreigners net purchased 1,014 3-year futures contracts and 3,584 10-year futures contracts.

On this day, interest rates on Treasury bonds began to decline significantly as U.S. Treasury bonds showed strength overnight amidst a preference for safe assets.

The U.S. 10-year Treasury bond yield fell below 5% for the first time in a month due to growing concerns about the profitability of AI investments, widespread selling of technology stocks, and geopolitical instability in the Middle East. This is the lowest level since the 17th of last month, and in terms of daily decline, it was the largest in 3 years and 7 months since March 10, 2023.

Afterwards, U.S. Treasury bond yields rebounded slightly in the Asian market and the domestic stock market also turned upward, reducing the decline in Treasury bond yields.

In the over-the-counter market, the 10-year Treasury bond index lowered its level to 4.045%, down more than 10bp immediately after opening, and the 3-year index also started down 3.753%. Afterwards, the 10-year Treasury bond closed at around 4.09% and the 3-year Treasury bond closed at around 3.80%.

A bond management manager at a securities firm said, “Treasury bonds started strong, reflecting the safety-preferring atmosphere in the U.S., but later on, as stock prices rebounded and U.S. bond yields rose in Asian trading, Treasury bond yields also reversed their early market decline.”

He explained, “There seems to be a burden due to the fact that government bond interest rates have been stronger than those of major countries,” and “With the announcement of France’s credit rating scheduled for this evening, caution ahead of the announcement of indicators such as growth rate next week also seems to have played a role.”

On this day, an audit of the National Assembly's Finance and Economic Planning Committee was also held. Bank of Korea Governor Shin Hyun-song agreed at the National Assembly after the previous day's monetary policy decision meeting that it would be difficult to easily return to the ultra-low interest rate era of the past, and emphasized, "We will implement policies well in preparation for a high-growth, high-interest rate situation in the future."