The Korean won climbed sharply, pulling the won-dollar exchange rate down into the 1,370-won range, while yields on Korean treasury bonds fell across all maturities. Despite caution ahead of the Bank of Korea's monetary policy meeting on the 27th, strong net buying of bond futures by foreign investors drove yields sharply lower, particularly on longer-dated debt.
The won closed at 1,382.4 per dollar in the Seoul foreign exchange market on the 24th, down 4.1 won from the previous session. During the day it fell as low as 1,376.5, entering the 1,370-won range. It marked a fresh intraday low for the year, extending the trend from the 21st. Won strength has continued recently as month-end dollar selling by exporters combined with offshore selling.
In the bond market, foreign buying of bond futures led the rally.
Treasury bond yields fell across all maturities that day. The three-year yield closed at 3.836%, down 0.018 percentage point from the previous session. The 10-year yield fell 0.041 percentage point to 4.335%.
A weaker exchange rate is also favorable for the bond market. If won strength persists, upward pressure on prices through import costs eases, and the Bank of Korea gains more room to maneuver on monetary policy. External factors such as U.S. long-term rates and global oil prices, however, are cited as potential limits on the bond market rally.
Even amid an outlook for strong tax revenue next year, one forecast holds that treasury bond issuance will not fall significantly. In a report that day, Citi projected total treasury bond issuance of 221 trillion won ($159 billion) in 2026 and 211 trillion won ($152 billion) in 2027, raising its previous estimates by 5 trillion won and 13 trillion won, respectively. The bank said the government is likely to channel surplus tax revenue into a future-response fund rather than reduce bond issuance, limiting room for a decline in bond supply.
Citi forecast that in 2027 the share of ultra-long treasury bonds, such as 20-, 30- and 50-year maturities, would shrink while other maturities gained weight. The government plans to announce its 2027 budget proposal and treasury bond issuance plan early next month.
