Korea Bond Curve Flattens as Front-End Yields Hit Multi-Year Highs

The Korean bond curve flattened further on September 14 as front-end yields reached multi-year highs while longer maturities retreated, according to Aju Press. The two-year and three-year government bond yields climbed to their highest levels since November 1, 2023.

The divergence in yields is attributed to the growing expectations of a higher-for-longer tightening path ahead of this week's Federal Reserve and Bank of Japan meetings.

U.S. Treasuries showed a similar pattern, with the two-year yield rising 4.4 basis points to 4.594 percent while the 10-year yield fell 2.4 basis points to 4.92 percent after briefly touching 4.98 percent following the latest U.S. inflation data.

Markets now price an 86 percent chance of a quarter-point Fed increase this week from the current 3.50 percent to 3.75 percent range, with Goldman Sachs shifting its forecast to a 25-basis-point increase and J.P. Morgan expecting another hike in December.