FX.co ★ South Korea 10-Year Yield Hits 8-Week High

The yield on South Korea's 10-year government bonds increased to approximately 2.88%, marking its highest level since early April. This rise was driven by improved risk sentiment following the presidential election outcome and a reduction in political uncertainty. In a snap election, opposition leader Lee Jae-myung emerged victorious, offering a new direction after months of instability following the impeachment of President Yoon Suk Yeol, who unsuccessfully attempted to declare martial law. On the economic side, South Korea's inflation rate decreased to a five-month low of 1.9% in May, coinciding with an unexpected GDP contraction—the first since the fourth quarter of 2020—based on advance estimates released last month. These lackluster economic indicators align with the Bank of Korea's recent decision to cut interest rates and suggest the potential for further monetary easing to mitigate growth-related risks. Additionally, the central bank has recently revised its GDP growth forecast for 2025 downward to 0.8%, significantly lower than the earlier estimate of 1.5%.