On the 19th, government bond rates rose sharply. This follows Moody's decision, one of the three major global credit rating agencies, to downgrade the United States credit rating.
On that day, in the Seoul bond market, the three-year government bond rate closed at 2.366% per annum, rising 4.7 basis points (1 basis point = 0.01 percentage point) from the previous transaction day. The two-year bond increased by 2.6 basis points to 2.363% per annum, while the five-year bond recorded 2.501%, up 5.6 basis points.
Long-term bond rates also rose. The ten-year bond increased by 7.1 basis points to 2.747% per annum, while the 20-year bond rose 5.5 basis points to 2.720%. The 30-year and 50-year bonds increased by 6.2 and 5.9 basis points, respectively, closing at 2.631% and 2.473% per annum.
The rise in interest rates is attributed to Moody's downgrading of the United States credit rating from the highest grade of "Aaa" to "Aa1" due to government liabilities on the 16th (local time). This caused U.S. Treasury rates to rise uniformly, and South Korea's government bonds also increased in response.
The ten-year bond rate was also influenced by the new issuance of 12.5 trillion won worth of government bonds (Government Bonds 02625-3506) that day. Bond rates move inversely to prices; as supply increases, prices fall, leading to an increase in rates.
In the results of the new issuance competitive bidding, 37.51 trillion won was bid, resulting in a bidding rate of 300.1%. In the consolidated competitive bidding for the same amount of ten-year government bonds (Government Bonds 03000-3412), bids reached 38.44 trillion won, with a bidding rate of 307.5%.