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(Seoul=Yonhap Infomax) Hyun Woo Roh – The Seoul bond market is expected to seek buying opportunities this week (November 24–28) ahead of the Bank of Korea’s Monetary Policy Board meeting.
With the yield on South Korea’s three-year government bonds hovering above 2.85%, market participants are watching whether Governor Rhee Chang-yong’s remarks at the upcoming meeting will serve as a catalyst for a bond rally.
However, concerns remain over continued exchange rate volatility and short-term supply-demand adjustments, which could trigger further weakness.
The Monetary Policy Board meeting on November 27 will also include the release of a revised economic outlook. The market expects the Bank of Korea to raise its 2025 GDP growth forecast from the previous 1.6% to a range of 1.8–2.0%.
Prior to this, the central bank will announce the results of the November 2025 Consumer Sentiment Survey and data on residents’ overseas card spending for Q3 2025 on November 25.
On November 26, the Bank of Korea will release the November Business Survey Index, Economic Sentiment Index, and the weighted average interest rates for financial institutions as of October 2025.
On November 27, the results of the Monetary Policy Board meeting and the December Monetary Stabilization Bond issuance plan will be disclosed, followed by the release of residents’ foreign currency deposit trends for October on November 28.
The Ministry of Economy and Finance will announce its December issuance plans for Treasury Bonds, Fiscal Securities, and won-denominated foreign exchange stabilization bonds on November 27. On November 28, it will release October’s industrial activity trends and national tax revenue data.
Partial Recovery in Investor Sentiment on Perception of Rate Peak
Last week (November 17–21), the yield on three-year government bonds (based on market average) fell 8.2 basis points to 2.873%, while the 10-year yield dropped 5.5 basis points to 3.275%.
The spread between 10-year and 3-year bonds widened from 37.5 basis points to 40.2 basis points, steepening the yield curve.
This partially reversed the sharp rise in yields seen the previous week, as bargain hunters entered the market on the perception that rates had peaked.
The Bank of Korea’s verbal intervention when the three-year yield approached 3.00% also encouraged buying at lower prices.
Correction in U.S. tech stocks further supported bond-buying sentiment. The Nasdaq remained weak ahead of Nvidia’s earnings release, rebounded briefly after the announcement, but fell again on renewed bubble concerns.
In a BBC interview on November 18, Governor Rhee Chang-yong commented on the ongoing debate over an AI investment bubble, stating that diverse demand for AI is likely to persist and that South Korea is relatively well-positioned.
However, the surging USD/KRW exchange rate limited the bullish momentum in the bond market. Foreign investors were net sellers of about 18,000 three-year KTB futures contracts and sold roughly 4,400 ten-year contracts last week.
In the U.S., two-year and ten-year Treasury yields fell by 10 and 8.5 basis points, respectively. Australia’s two-year yield declined by 0.29 basis points, while the ten-year yield rose by 2.37 basis points.
Expectations for Governor’s Message vs. Concerns Over FX and Short-Term Supply
Expert opinions are divided. Some expect Governor Rhee’s message to stabilize the market, while others remain cautious due to exchange rate and supply-demand risks.
Moon Hong-chul, Head of Asset Strategy at DB Financial Investment, said, “The Bank of Korea’s shift in monetary policy stance, citing the exchange rate, has prolonged instability in the short-term bond market. This has led to selling by leveraged players such as repo funds, dealers, and foreign investors in KTB futures, creating supply-side headwinds.”
He added, “While fundamentals are likely to deteriorate in the medium to long term and U.S. easing and rate cuts are expected, risk management is necessary until the exchange rate stabilizes.”
Cho Yong-gu, Researcher at Shin Young Securities, said, “Following the recent foreign media interview, Governor Rhee is expected to clarify that his remarks were largely misinterpreted and to reaffirm his commitment to market stability.”
He explained that the governor may note that a transition from a rate hike to a rate cut cycle took 21 months previously, and that an immediate shift back to hikes is unlikely, making a period of rate hold inevitable.
He added that if the three-year KTB yield exceeds 2.90%, much of the rate hike has already been priced in, making it favorable for buyers.
hwroh3@yna.co.kr
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