(Seoul = Yonhap News) Reporter Kang Su-ji = Korean Treasury bond yields, which rose significantly this year in response to the rise in US Treasury yields and international oil prices, are showing a relatively solid trend despite the recent rise in global interest rates.
The financial investment industry believes that Korea's financial conditions and export competitiveness are superior to those of major countries, so it can be a factor in attracting foreign investors to Korean government bonds.
According to the Seoul bond market on the 13th, the final quotation yield of 3-year Treasury bonds closed at 3.921%, down 6.2bp from the previous trading day. The 10-year bond interest rate also fell 8.9bp to 4.306%.
While the domestic bond market was closed for the holidays, the rise in long-term interest rates in the United States calmed down, but foreigners' buying of government bond futures supported investment sentiment. Foreigners made a net purchase of 34,789 contracts of 3-year government bond futures the previous day. This is the second-largest daily net purchase in history, following 42,353 contracts recorded on April 4, 2025. Foreigners also made net purchases of 12,126 contracts in 10-year government bond futures, the largest purchase in four months since last June.
It is possible that this net purchase included a buying force to liquidate existing short (sell) positions. However, if preemptive futures buying continues, there is a possibility that the buying trend will shift to spot goods as well.
Treasury bond interest rates have mostly recovered to the level before the global interest rate surge that began in late August.
Recently, global government bond interest rates have risen sharply since last September as the possibility of a U.S. policy interest rate hike increases. In addition, concerns about a resurgence in international oil prices and concerns about each country's financial soundness put a burden on interest rates.
Since the end of August, the U.S. 10-year Treasury bond yield has surged by about 59bp. German and Australian 10-year interest rates each rose by 35 basis points and then decreased, while French 10-year interest rates surged 79 basis points due to financial concerns. Japan, which has a relatively small range of interest rate fluctuations, also slightly reversed its rate after rising by 18 basis points.
Korea's 10-year interest rate also rose by up to 32bp during the same period, but most of the increase was later reversed and returned to the current level at the end of August.
The bond market interprets this as a result of the relative attractiveness of Korean bonds being highlighted.
A bond manager at a foreign securities company explained, “Korea is now considered a country with much better finances than the United States or Japan,” and “Korea is a preferred market when betting on a decline in global interest rates.” He said that the reason why foreign purchases were concentrated in government bond futures was because futures were a relatively easy means of trading in a situation where the liquidity of spot bonds was low, and that there was a possibility that it would lead to spot purchases later.
The solid export outlook also adds strength to the positive view of Korean bonds.
A bond broker at another securities company suggested the hypothesis that funds could move from government bonds of advanced European countries to Korean government bonds, citing the fact that there are not many countries with good domestic exports and government bond interest rates at a level suitable for investment. He said, "If export companies' currency exchange volume increases due to solid exports, there is a possibility that the won will strengthen and foreign funds will flow into the domestic bond market."
However, since the starting point of this interest rate rise and fall was the volatility of U.S. Treasury yields, it is difficult to view it as an independent strength of Korean government bonds that is unrelated to the external interest rate environment. Nevertheless, the fact that foreign purchases were concentrated in Korean government bonds, which reacted sensitively to the rise in global interest rates and oil prices this year, shows investors' interest in Korea's relative financial and export conditions.
