사진 확대 (Yonhap)
The South Korean bond market is under upward pressure as U.S. Treasury yields soar, fueling concerns over a sharp rise in household interest burdens.
According to financial market data on Sunday, the yield on the 3-year U.S. Treasury note rose to 4.138 percent on Friday, local time, the highest level since February 24, 2025, when it reached 4.173 percent.
Bond yields across major economies also surged as persistent inflation pressures and renewed concerns over fiscal soundness in debt-laden economies triggered a broad bond selloff.
Alongside the surge in bond yields, expectations grew that the U.S. Federal Reserve could raise interest rates further. According to CME FedWatch data on Saturday, the probability of a U.S. rate hike in December reached 50 percent.
The aftershocks also intensified in Korea’s financial markets. Expectations that the Bank of Korea could return to a tightening cycle pushed Korean government bond yields sharply higher.
On Friday, the yield on Korea’s 3-year Treasury bond closed at 3.766 percent, the highest since November 14, 2023, while the 10-year Treasury bond yield rose to 4.217 percent, the highest since November 1, 2023.
Rising market rates and the possibility of a benchmark rate hike this year fueled concerns over repayment burdens for household borrowers.
According to data submitted by the Bank of Korea to Representative Park Sung-hoon of the People Power Party, a 0.25 percentage-point increase in lending rates would raise household interest burdens by 3.2 trillion won ($2.13 billion). Outstanding household loans stood at a record 1,852.7 trillion won at the end of last year.
Market participants warn that continued increases in rates would further strain highly leveraged borrowers. Korea has a relatively high share of variable-rate mortgage loans, leaving households more exposed to rising market rates.
The cost of funds index (COFIX), a benchmark for variable-rate mortgages, also continued to rise.
According to the Korea Federation of Banks, the April COFIX for newly issued loans rose to 2.89 percent from 2.81 percent a month earlier. The yield on 5-year bank bonds rose from 3.809 percent on April 15 to 4.279 percent on Friday, up 0.47 percentage point in a month. Higher bank bond yields typically lead to higher rates on mortgages and other household loans.
Meanwhile, the sharp rise in U.S. bond yields also rattled oil prices and stock markets. As of Friday, Brent crude futures rose 3.4 percent to $109 per barrel, while West Texas Intermediate crude climbed 4.2 percent to $105. U.S. equities, which had remained resilient on optimism over artificial intelligence investment despite uncertainty surrounding the Iran war, also weakened.
By Kim Hye-ran, Kim Jeong-beom, Lim Sung-hyun and Chang Iou-chung
[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]