[Asia Economy Reporter Kwon Jaehee] As concerns over tightening liquidity in the domestic market grow, government bond yields rose across the board on the 20th.
On that day, in the Seoul bond market, the yield on 3-year government bonds closed at 4.350% per annum, up 1.9 basis points (1bp = 0.01 percentage points) from the previous trading day.
The 10-year bond yield rose 4.3bp to 4.439% per annum, hitting a new annual high. This is the highest level since May 9, 2011 (4.44% per annum).
The 5-year and 2-year yields increased by 5.7bp and 0.8bp, closing at 4.463% and 4.324% per annum, respectively.
The 20-year bond yield rose 7.2bp to 4.329% per annum, marking a new annual high. This is the highest level since July 27, 2011 (4.33% per annum).
The 30-year and 50-year yields each rose 5.5bp to 4.198% and 4.155% per annum, respectively. These are the highest levels since their initial issuance dates of September 11, 2012, and October 11, 2016.
Liquidity concerns triggered by the default of asset-backed commercial paper (ABCP) related to Legoland in Gangwon-do have struck the bond market hard, causing investor sentiment to freeze sharply.
As rumors spread that financial institutions are facing liquidity difficulties, intensifying market shocks, the Financial Supervisory Service announced on the same day that it would take strong action through a joint inspection team.
Kim Joo-hyun, Chairman of the Financial Services Commission, stated, "We will promptly resume purchases using the 1.6 trillion won in available funds from the Bond Market Stabilization Fund (Cha-an Fund). Regarding the real estate project financing (PF) market, we will quickly prepare and announce financial support programs if necessary to prevent the spread of market instability."
Kang Seok-hoon, President of the Korea Development Bank, also said that the bank would promptly deploy the Cha-an Fund it operates to respond to instability in the liquidity market.
Although global tightening continues, the fact that inflation remains uncontrolled is also cited as a factor fueling market concerns.
The UK's Consumer Price Index (CPI) for September rose 10.1% year-on-year, exceeding the previous month's 9.9%, and the Eurozone's September CPI also rose 9.9%, up from 9.1% the previous month, marking a record high.
Accordingly, on the 19th (local time), the US 10-year Treasury yield surpassed 4%, rising to 4.13%, and the 2-year yield also exceeded 4.5% again, reaching 4.56%.
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