Japan's 10-Year Yield Hits 30-Year High, Surging to 2.93%

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

1. Japan's Long-Term Yield Hits Record High in 30 Years… Former ADB Chief: "Raise Rates at Every Meeting"

- Key summary: The yield on newly issued 10-year Japanese government bonds rose as high as 2.930% at one point, its highest level in about 30 years since September 1996. Expectations that the Bank of Japan will move to raise rates as early as its September monetary policy meeting fueled the sell-off, while rising international oil prices tied to Middle East tensions and higher U.S. long-term yields also weighed on the market. The two-year yield rose to 1.690% and the five-year to 2.170%, each setting a record high. Takehiko Nakao, former president of the Asian Development Bank (ADB), said Japan's real interest rate remains negative and that it would not be unusual for the policy rate to reach 2.25% or 2.5%. However, with second-quarter real gross domestic product (GDP) growing at an annualized 1.1%, below the market forecast of 2%, a decision to tighten monetary policy is not straightforward.

2. Surging Bond Yields Leave Japan Unable to Halt Weak Yen… "Korea Must Not Overestimate Its Fiscal Room"

- Key summary: Japan's government debt ratio exceeds 260% of GDP, acting as a factor pushing up bond yields, mainly on medium- and long-term maturities. Interest payment pressure from the massive debt limits the Bank of Japan's room for further rate hikes, entrenching the U.S.-Japan rate gap and prolonging the weak yen, analysts say. The yen-dollar rate, which had fallen to the 155-yen range after joint U.S.-Japan intervention, has climbed back to the mid-159-yen range. U.S. national debt grew 10.1%, from $35.4647 trillion in the third quarter of 2024 to $39.065 trillion in the first quarter of this year, and the U.K. 10-year yield rose to 5.04%, its highest since July 2007. Korea's national debt stands at 1,412.8 trillion won, or 50.6% of GDP, but with mandatory spending set to rise to 465.7 trillion won by 2029, analysts warn that reliance on deficit bonds could grow if tax revenue gains driven by the semiconductor boom lose momentum.

3. Announcement Timing for "Late August to Early September" Still Holds, but… "Delayed Investment Risks Retaliatory Tariffs, as With Canada"

- Key summary: The $200 billion investment in the U.S. pledged by Korea and the U.S. is again in flux ahead of the announcement of its first project. Kim Jung-kwan, Minister of Trade, Industry and Energy, said a range of specific issues is emerging in the final stage of negotiations, and officials inside and outside the government say U.S. complaints over Korea's pace continue. Some also point out that the U.S. is demanding only projects with low commercial viability, such as carbon capture and storage (CCS) infrastructure. The biggest risk is the card of a tariff increase if the investment is delayed: on top of the 12.5% tariff already imposed, if unannounced Section 301 trade-law tariffs related to overproduction exceed 2.5%, the agreed 15% would be surpassed.

4. Trump, Having Lost the Economic Public Mood, and Iran With 88% Inflation… A Cliff-Edge "Hold-Out"

- Key summary: With the 60-day ceasefire talks between the U.S. and Iran ending without clear results, the war is shifting toward a contest of endurance. U.S. President Donald Trump threatened to declare the Strait of Hormuz U.S. territory, and the U.S. is considering secondary sanctions on Chinese refiners that import Iranian crude and on Iranian financial institutions. However, with high inflation weighing more heavily ahead of the November midterm elections, responses favoring the Democratic Party on economic issues stood at 37% versus 36% for the Republican Party, leading for the first time in about a decade. The average U.S. gasoline price was $4.07 per gallon, up 29% from a year earlier. Iran's misery index hit a record high of 91.1%, and last month's inflation neared 88%, leaving both sides in a difficult test of stamina.

5. Running Its Own Market Pays Off… Nighttime Futures Turnover Tops 1,000 Trillion Won

- Key summary: KOSPI 200 nighttime futures turnover reached 1,034.199 trillion won through the 14th of this month, surpassing 1,000 trillion won. Of this, foreign turnover accounted for 799.6815 trillion won, or 77.3% of the total, and foreign investors made net purchases of 2.324 trillion won. Since the Korea Exchange opened its own nighttime market on June 10 last year, monthly turnover has grown from the 10-trillion-won range to top 100 trillion won this February. The nighttime share relative to daytime turnover also expanded from 6.9% last year to about 15% this year, establishing itself as a channel reflecting overnight market events.

6. Mezzanine Issuance Nears 9 Trillion Won… Companies Turn to CBs Amid High Rates

- Key summary: This year, fundraising through mezzanine instruments such as convertible bonds (CBs), bonds with warrants (BWs) and exchangeable bonds (EBs) reached 8.8733 trillion won, nearing 9 trillion won. Of this, CB issuance totaled 7.4744 trillion won, about 84% of the total, leading the market's expansion. While yields on three-year AA- corporate bonds jumped from the 2-3% range last year to the mid-to-high 4% range this year, strong share prices raised the value of conversion rights, boosting the appeal of this financing, analysts say. Korea Aerospace Industries and Hyundai Engineering & Construction (000720.KS) each issued 500 billion won in CBs at a 0% coupon, and Samsung SDS raised 1.22 trillion won, with even blue-chip conglomerates joining in.