The market was heavily influenced by overnight drops in U.S. Treasury yields, which plummeted significantly as safe-haven buying flowed in amid concerns over artificial intelligence (AI) overinvestment and credit risks. Foreign net buying of treasury futures also continued.

In the Seoul bond market that day, the yield on 3-year Korean Treasury bonds closed at 3.803% per annum, down 3.7 bp (1 bp = 0.01 percentage point) from the previous trading day.

The 10-year yield fell 5.5 bp to 4.097%. The 5-year and 2-year yields declined 3.5 bp and 2.4 bp, respectively, finishing at 3.948% and 3.760%. The 20-year yield fell 4.0 bp to 4.170%. The 30-year and 50-year yields dropped 5.0 bp and 4.3 bp, respectively, recording 4.189% and 4.231%.

The 3-year treasury futures rose 7 ticks from the previous day to close at 103.15, while the 10-year treasury futures increased 34 ticks to 107.13. Foreign investors net-purchased 1,014 contracts of 3-year futures and 3,584 contracts of 10-year futures.

On this day, Korean Treasury bond yields opened sharply lower as U.S. Treasuries showed strength amid a safe-haven asset preference atmosphere overnight.

The U.S. 10-year Treasury yield fell below the 5% mark for the first time in a month as growing concerns over the profitability of AI investments spread selling pressure in tech stocks, compounded by geopolitical instability in the Middle East. This marked the lowest level since the 17th of last month, and in terms of daily decline, it was the largest drop in 3 years and 7 months since March 10, 2023.

Later in the Asian market, U.S. Treasury yields rebounded slightly, and domestic stock markets turned upward, causing Korean Treasury yields to narrow their declines.

In the over-the-counter market, the benchmark 10-year Korean Treasury bond lowered its level to 4.045%, plunging more than 10 bp right after opening, and the 3-year benchmark also started lower at 3.753%. Afterward, the 10-year and 3-year Korean Treasury bonds closed around 4.09% and 3.80%, respectively.

A bond dealer at a securities firm explained, "Korean Treasury bonds started strong, reflecting the safe-haven sentiment from the U.S., but as stock prices rebounded and U.S. Treasury yields rose during Asian trading hours, Korean Treasury yields also retraced their early morning declines."

They added, "It seems there was also a burden regarding the fact that Korean Treasury yields had previously been strong compared to those of major countries. With France's credit rating announcement scheduled for this evening and vigilance ahead of next week's economic indicator releases such as growth rates, such caution appears to have played a role."

Meanwhile, a parliamentary audit by the National Assembly's Strategy and Finance Committee was also held on this day. Following the monetary policy decision meeting the previous day, Bank of Korea Governor Shin Hyun-song agreed at the National Assembly that it would be difficult to easily return to an era of ultra-low interest rates like in the past, emphasizing, "We will well implement policies in preparation for a high-growth, high-interest-rate environment going forward."

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