[Bond Market Closing]3-Year Treasury Yield Rises Back Above 2.9%—FX Pressures Weigh on Market

(Seoul=Yonhap Infomax) Hye Rim Pi – South Korean government bond yields climbed on the 24th, reversing early gains as mounting pressure from the dollar-won exchange rate weighed on the market.

After opening stronger, Treasury yields turned higher as the session progressed, with the 3-year benchmark yield ending up 3.2 basis points at 2.904%. The 10-year yield closed at 3.289%, up 1.8 basis points from the previous session, according to the Seoul bond market.

In futures trading, the 3-year Treasury futures contract fell 9 ticks to 105.81, with banks net selling 4,270 contracts and securities firms net buying 2,379 contracts. The 10-year Treasury futures dropped 19 ticks to 114.18, as banks bought 3,701 contracts and securities firms sold 3,029 contracts. The 30-year Treasury futures slipped 0.04 points to 133.80 on volume of 99 contracts.

Market Outlook

Market participants expect continued caution as they monitor developments in equities and foreign exchange markets. "The bond market initially strengthened on equity market corrections, but turned weaker as the dollar-won rate broke above 1,470 despite a softer dollar index," said a bond dealer at a securities firm. "The direction of the dollar-won exchange rate will remain the key factor tomorrow, especially as it approaches a psychological resistance level, keeping market tension elevated," the dealer added.

A bond dealer at a major commercial bank noted, "The relatively weak demand at the 5-year Treasury auction appears to have limited the recent rally." The dealer continued, "Recent patterns show the stock market rising and then seeing foreign investors take profits, while the FX market remains volatile. Overall, both bullish and bearish factors are mixed, and bond supply-demand will likely be driven by foreign investor flows."

Intraday Developments

The 3-year Treasury yield (issue 25-4) opened at 2.856%, down 1.7 basis points from the previous day's private sector evaluation. The 10-year benchmark (issue 25-5) started at 3.274%, down 0.1 basis points.

Overnight, the US 2-year Treasury yield fell 2.5 basis points to 3.5100%, while the 10-year yield dropped 2.1 basis points to 4.0650%. Dovish comments from John Williams, President of the Federal Reserve Bank of New York, contributed to the decline. Speaking at the Central Bank of Chile's centennial event in Santiago on the 21st, Williams said, "I still see the possibility of further adjustments to the federal funds rate target range in the near term to bring policy closer to neutral."

Korean Treasury futures opened slightly higher, reflecting the US rate declines, but foreign investors' net selling capped further gains. The 5-year Treasury auction saw 2.8 trillion won ($2.1 billion) awarded at a yield of 3.060%, with total bids reaching 7.715 trillion won ($5.8 billion). Market participants in Seoul described the auction as lackluster, and yields rose further after the results.

The rebound in the dollar-won exchange rate during the session also added to market pressure. The rate climbed to the upper 1,470-won range in the afternoon, closing regular trading at 1,477.10 won—the highest since April 9.

As yields extended gains, the 3-year Treasury yield returned above the 2.9% level by the close. Japanese financial markets were closed for the Labor Thanksgiving Day substitute holiday.

Foreign investors were net sellers of 279 contracts in 3-year Treasury futures and 1,306 contracts in 10-year futures. By the end of the Asian session, US 2-year and 10-year Treasury yields had risen 1.90 and 0.60 basis points, respectively. Trading volume in 3-year Treasury futures reached 184,063 contracts, with open interest up by 7,877. The 10-year futures saw 83,518 contracts traded, with open interest increasing by 461.

Korea Financial Investment Association Final Quotation Yields (as of 24th)

(As of 2025/11/24 16:35)

phl@yna.co.kr

(End)

© Yonhap Infomax. Unauthorized reproduction, redistribution, or use for AI training is strictly prohibited.