Korean treasury bond yields closed lower on the 29th, retracing part of the previous session's sharp rise, as prices climbed. The government said it would immediately implement market stabilization steps, including emergency buybacks, if yields rose excessively, easing some of the market's caution. Still, analysts said upward pressure on yields remains, given uncertainty over whether excess tax revenue will be used to repay debt, the size of future bond issuance and rising rates abroad.
In the Seoul bond market, the yield on three-year treasury bonds ended at 4.076%, down 0.043 percentage point from the previous session. The five-year yield fell 0.069 percentage point to 4.276%, while the 10-year yield declined 0.063 percentage point to 4.476%.
Overseas rate moves and a pullback from the prior day's surge drove the decline. The Reserve Bank of Australia raised its policy rate by 0.25 percentage point that day, but signaled at a subsequent press conference that further increases were unlikely, sending Australian government bond yields lower. Korean yields extended their intraday declines in tandem.
The government's commitment to market stability also appeared to play a role. Lee Hyoung-il, deputy prime minister and minister of finance and economy, told a cabinet meeting that the government would immediately carry out necessary market stabilization measures, including emergency buybacks, if treasury bond yields rose excessively. He added that the government would closely monitor conditions in the treasury bond market and respond immediately as circumstances warrant.
Lee Jae-hyung, an analyst at Yuanta Securities Korea, said domestic yields are decoupling from U.S. rate trends and that absolute yield levels are attractive at current points. He said the government's remarks on buybacks could serve as a trigger for buying.
Uncertainty over treasury bond supply and demand nonetheless remains. A revised estimate of national tax revenue, due on the 30th, is one such factor. The market had expected that more than 10 trillion won of excess tax revenue could be used to repay existing debt, but President Lee Jae-myung said the same day that the government would actively use available resources, including excess tax revenue, for three core social policies: housing stability, jobs and inclusive finance.
Pressure from overseas rates also persists. With the U.S. 10-year Treasury yield above 5.2%, continued increases in rates in the U.S. and other major economies could push domestic treasury bond yields higher.
