Fiscal Splurge Sends U.S., U.K. Bond Yields Soaring; Korea Not Immune

* Editor's note: AI PRISM (Personalized Report & Insight Summarizing Media) is an artificial intelligence-based personalized news recommendation and summary service developed with support from the Korea Press Foundation. It selects and provides six tailored news items by reader type.

1. Bond Yields Spike; Japan Cannot Halt Weak Yen; Korea Must Not Be Overconfident in Fiscal Room

- Key summary: Expansionary fiscal policies in major economies are coming back as a bill in the form of rising bond yields. U.S. national debt swelled 10.1%, from $35.4647 trillion just before President Donald Trump returned to office to $39.065 trillion in the first quarter of this year, and the recent $25 billion auction of 30-year Treasury bonds cleared at 5.216%, the highest in 25 years. In Britain, where the ratio of government debt to gross domestic product (GDP) is projected to rise from 85% in 2019 to 103.6% this year, the 10-year yield hit 5.04%, its highest since July 2007. Korea's national debt, meanwhile, stands at 1,412.8 trillion won, or 50.6% of GDP. However, mandatory spending such as welfare and transfer payments is projected to grow at an annual average of 5.9%, reaching 465.7 trillion won by 2029, raising concerns that reliance on deficit bonds could grow if the semiconductor boom fades.

2. Sold Well When Prices Rose: Korea Zinc's Indium Inventory Strategy Pays Off

- Key summary: Korea Zinc (010130.KS) released inventory during a surge in indium prices and absorbed the gains into earnings. Second-quarter indium sales volume jumped 51% from the previous quarter, in contrast to a mere 7% increase for antimony, a key material for the defense industry. Indium prices rose from $355 per kilogram in the first quarter of last year to $713 in the second quarter of this year, then climbed to around $791 this quarter, a result of tighter Chinese export controls combined with demand from AI data centers and optical communications. As a result, antimony's share of rare-metal revenue fell from 70% in the second quarter of last year to 43% in the second quarter of this year, while indium's share more than doubled, from 10% to 22%.

3. Japan's Long-Term Yields Hit Record High in 30 Years; Former ADB President Says Rates Should Rise at Every Meeting

- Key summary: Bond selling intensified as expectations spread that the Bank of Japan would raise interest rates in September. On the 17th, the yield on newly issued 10-year government bonds rose as high as 2.930%, its highest in about 30 years since September 1996, while the 2-year and 5-year yields set record highs of 1.690% and 2.170%, respectively. Takehiko Nakao, former president of the Asian Development Bank (ADB), stressed that even after raising the base rate to 1%, Japan's real interest rate remains negative, and that reaching 2.25% or 2.5% would not be unusual. However, second-quarter real GDP grew at an annualized 1.1%, below the market forecast of 2%, making it difficult to judge monetary tightening.

4. Mezzanine Issuance Nears 9 Trillion Won as High Rates Drive Companies to Convertible Bonds

- Key summary: Fundraising through mezzanine financing has approached 9 trillion won this year. Cumulative issuance totaled 8.8733 trillion won, reaching 82.7% of last year's full-year issuance, of which convertible bonds (CBs) accounted for about 84%, at 7.4744 trillion won. The backdrop is that yields on three-year AA- rated corporate bonds, which were in the 2-3% range last year, jumped to the mid-to-high 4% range this year, while a strong stock market raised the value of conversion rights. Blue-chip conglomerates have also joined the market, with Korea Aerospace Industries and Hyundai Engineering & Construction (000720.KS) each issuing 500 billion won in CBs at a 0% coupon rate, and Samsung SDS raising 1.22 trillion won.

5. Order Effect Overrides Earnings Miss: Doosan Fuel Cell Jumps 54% This Month

- Key summary: Doosan Fuel Cell (336260.KS) shares rebounded 54.2% in August, overcoming weak second-quarter results. The stock, which was at 24,550 won at the end of last month, rose to a closing price of 37,850 won on the 14th, and its market capitalization swelled by 871.1 billion won, from 1.6079 trillion won to 2.4789 trillion won. Second-quarter revenue was 44.3 billion won, down 65.5% from a year earlier, with an operating loss of 50.9 billion won, but orders disclosed this month alone reached 225.6 billion won, including a 108.7 billion won contract to supply solid oxide fuel cell (SOFC) stacks to Germany's Rieberion. However, with an annual operating loss projected at 71.5 billion won and a debt ratio of 346% at the end of June, up 120 percentage points from the end of last year, analysts say confirmation is needed of whether the orders translate into earnings.

6. Entertainment Stocks Lose Momentum, and ETFs Rack Up Losses Too

- Key summary: The entertainment sector's weakness fed directly into the returns of related ETFs. Last week, excluding leveraged and inverse products, TIGER Media Contents ranked last among domestic ETFs at -5.56%. ACE KPOP Focus (-4.65%) and HANARO Fn K-POP & Media (-4.35%) also ranked near the bottom, and all three products posted returns in the -40% range since the start of the year. Over the same period, the KOSPI and KOSDAQ rose 11.49% and 8.24%, respectively, while JYP Ent. (035900.KS) plunged 12.29%, and Hybe (352820.KS), SM Entertainment (041510.KS) and YG Entertainment (122870.KS) also fell in tandem. Meanwhile, JYP's second-quarter operating profit plunged 41% to 31 billion won, prompting 13 target-price cut reports within two days, as market attention shifted to the growth visibility of next-generation intellectual property (IP).