FX.co ★ South Korea 10Y Yield Hits 3-Year High

South Korea’s 10-year government bond yield rose above 4.40% in mid-July, its highest level since October 2022, as markets increasingly priced in a 25 bps rate hike by the Bank of Korea. Such a move would be the central bank’s first increase in more than three years, and most economists expect a further hike by year-end that would lift the policy rate to 3%. Expectations for tighter monetary policy have been bolstered by stubborn inflation and solid economic growth. Consumer prices climbed 3.2% in June, the fastest pace in two and a half years, and remained well above the BOK’s 2% target. At the same time, GDP grew 1.8% quarter-on-quarter in Q1, the strongest quarterly expansion in five years, underpinned by robust semiconductor exports and resilient domestic demand. Rising housing prices, high household debt, and a weaker won have further strengthened the case for higher interest rates by amplifying inflationary pressures and imported cost risks.