South Korea’s 10-year government bond yield fell to around 4.14% in late October, its lowest level since June, as foreign demand for government bond futures drove prices higher. Growing worries over rising debt at AI infrastructure firms further supported safe-haven flows into government bonds, while declining US Treasury yields added downward pressure on Korean yields.
On the monetary policy front, the Bank of Korea left its policy rate unchanged at 3% on October 22, pausing after consecutive 25 bps hikes in July and August that were aimed at containing inflation and addressing financial stability risks, notably surging housing prices and increasing household debt. Governor Shin Hyun Song has recently signaled that any additional tightening will proceed gradually and be guided by incoming data, while reiterating the central bank’s commitment to maintaining a restrictive stance until inflation moves sustainably toward its 2% target.
In this context, persistent inflationary pressures and robust, semiconductor-driven growth are keeping market expectations for a further rate hike in November intact.
