FX.co ★ South Korea 10Y Yield Climbs to Highest Since 2023

South Korea’s 10-year government bond yield rose to around 4.33% in early June, the highest level since November 2023. The move reflects expectations of stronger growth and more persistent inflation, driven by robust AI-related investment and surging semiconductor demand, and is reinforcing views that the Bank of Korea will keep policy tight. Swaps markets now imply at least three rate hikes this year, which would raise the policy rate from 2.5% toward 3.25%. At the same time, the annual inflation rate accelerated to 3.1% in May, its highest since March 2024, while core inflation remained at 2.5%. Along with a weaker won, this has intensified worries about entrenched price pressures and imported inflation. Adding to the upward pressure on yields are uncertainty around fiscal spending and the potential for additional bond issuance, even as authorities have tried to limit supply and increase market monitoring to contain volatility.