In Seoul's bond market that day, the three-year government bond yield closed at 4.119%, up 0.113 percentage point from the previous session. That marks the highest level since Nov. 8, 2022, when it stood at 4.156%. The five-year yield rose 0.125 percentage point to 4.345%, while the 10-year yield climbed 0.147 percentage point to 4.539%.
Analysts said domestic yields absorbed the full impact of the spike in U.S. Treasury yields during the Chuseok holiday, with no offsetting developments to cushion the shock. Over the holiday period, the 10-year U.S. Treasury yield surpassed 5.2%, its highest since June 2007. The 30-year Treasury yield also rose above 5.5%, the highest level since May 2004. Inflation concerns in the U.S., resilient growth and the prospect of another rate increase in October were seen as driving the moves.
"After the surge in U.S. Treasury yields, foreign investors sold Korean bond futures, pushing government bond yields sharply higher," a bond manager at a securities firm said.
The won-dollar rate also rose sharply as the dollar strengthened on the back of higher U.S. yields. In the Seoul foreign exchange market, the won traded at 1,365.10 per dollar as of 3:30 p.m., up 7.6 won from the same time in the previous session. The dollar index (DXY), which tracks the greenback against six major currencies, moved above the 101 level.
The won-dollar rate slipped to the 1,355-won range early in the session but extended gains in the afternoon, reaching as high as 1,365.50 won intraday. Quarter-end selling of dollars by exporters capped the upside, but upward pressure intensified as foreign investors sold a net 3 trillion won worth of Korean stocks.
The Bank of Korea held a market conditions review meeting the same day, chaired by Deputy Governor Kwon Min-su, examining key variables including the direction of U.S.-Iran negotiations, concerns over fiscal soundness in major economies and shifting expectations for the artificial intelligence industry. The central bank said it would closely monitor the potential for increased volatility in domestic financial and foreign exchange markets stemming from those factors.
