Global Government Bonds yields are rising again. After a rebound in U.S. Government Bonds yields that were showing a downward trend following the imposition of reciprocal tariffs, Japanese Government Bonds yields are also maintaining an upward trajectory. The yield on Korean Government Bonds has also been affected, shifting to a rising trend, leading to speculation that changes may occur in the timing of the Bank of Korea's interest rate cuts.
According to the U.S. Department of the Treasury on the 14th, the yield on U.S. 10-year Government Bonds closed at 4.43% on the 11th (local time). The 10-year yield had decreased to 4.06% in early April and stabilized, but after the announcement of the reciprocal tariff, it exceeded 4.5% within a month. It has slightly decreased since then but still remains at a high level.
Long-term interest rates are also on an upward trajectory. On the same day, both the 20-year and 30-year Government Bonds were traded at 4.96%. This figure exceeds the upper limit of the U.S. benchmark interest rate of 4.50%. This marks an increase of over 0.3 percentage points compared to early April, when they were 4.56% and 4.52%, respectively.
Japan is experiencing a similar trend. According to Investing.com, the yield on Japanese 10-year Government Bonds rose to 1.50% during trading on the 11th. The yield, which had dropped to 1.05% in early April this year, broke through 1.56% in mid-May, marking the highest level since the 2008 global financial crisis. It has slightly decreased since then but still maintains levels akin to those during the global financial crisis.
The rise in global interest rates has direct and indirect impacts on Korea. If foreign funds flee to countries with higher interest rates, the Korean won may weaken, leading to rising import prices and an increase in market interest rates. For the Bank of Korea, whose main responsibilities include price stability and financial stability, the circumstances make it difficult to easily lower the benchmark interest rate.
In fact, the yield on Korean Government Bonds has also turned to a rising trend. According to the Korea Financial Investment Association, the yield on 5-year Government Bonds fell to 2.375% on April 30, then rebounded from early May, reaching 2.604% on the 11th of this month. The medium-term yield, which briefly fell below the benchmark interest rate (2.50%), is rebounding, leading to changes in the structure of market interest rates.
Short-term interest rates, which are closely influenced by the benchmark interest rate, are also showing an upward trend. As of the 10th, the yield on 2-year Government Bonds closed at 2.421%, and the 3-year yield was 2.448%. Compared to April 30, when they were 2.323% and 2.267%, respectively, this represents an increase of about 0.1 percentage points. Although expectations for a benchmark rate cut remain, the actual market interest rates are moving in the opposite direction.
Markets believe that the upward pressure on global Government Bonds yields may continue in the future. Park Sang-hyun, a researcher at iM Investment & Securities, noted, "With the recent uncertainty over tariffs re-emerging, U.S. Government Bonds yields that were showing a downward trend have rebounded again, and with potential fiscal risks in the U.S. following the passage of tax cuts, if inflation indicators fluctuate due to the impact of tariffs, U.S. Government Bonds yields could again experience significant volatility."
This trend is expected to influence the Bank of Korea's monetary policy decisions. While the pressure of rising prices has decreased recently, increasing the likelihood of an interest rate cut, market volatility in the global Government Bonds may delay the timing of such cuts. Especially as the U.S. Federal Reserve and the Bank of Japan are holding interest rates steady, the Bank of Korea may need to be cautious of potential capital outflows or sharp currency fluctuations if it independently lowers rates.
Researcher Park stated, "Due to President Trump's repeated comments on tariffs, the fatigue in financial markets may increase for the time being, and we should be wary of this," adding that "tariff fatigue could amplify volatility in the financial markets." He noted that monitoring the trends of inflation indicators, Government Bonds yields, and consumer indicators over the next 1 to 2 months will be essential.