South Korea’s 3-year treasury bond yield broke through the 4% threshold during intra-day trading, hitting its highest level in approximately three years. According to financial market data provider Infomax, the benchmark 3-year treasury yield rose by about 9 basis points to trade at 4.019%, marking the highest mark since November 2023 based on fair pricing standards. Longer-term debt also faced heavy sell-offs, with the 10-year treasury yield climbing 10 basis points to 4.553%, reaching a peak not seen since October 2022. 

This domestic bond market slump was primarily triggered by a sharp overnight spike in US Treasury yields. Global crude oil prices surged back above the $100-per-barrel mark amid persistent military tensions between the United States and Iran. Coupled with higher-than-expected US Producer Price Index (PPI) figures for August, persistent inflation anxieties gripped global financial markets.

Further compounding bond market weakness were fiscal concerns surrounding political developments in the US. US President Donald Trump pledged to distribute $5,000 to every American adult if the Republican Party secures a victory in the upcoming midterm elections, a promise that amplified worries over ballooning US fiscal deficits and stoked additional upward pressure on global yields.

Reflecting these pressures overseas, the US 2-year Treasury yield surged by over 15 basis points to briefly cross 4.59%—its highest level since July 2024—while the 10-year yield climbed 12 basis points to 4.964%. Market analysts note that domestic bond yields could face extended upward pressure as investors closely monitor upcoming US Consumer Price Index (CPI) releases and the unfolding geopolitical landscape in the Middle East.

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