As global government bond yields rose in tandem, domestic market rates were hit with a chain reaction of increases. The 30-year treasury bond yield, which recorded an all-time high last month, surged by the largest margin in three months—10bp (1bp=0.01 percentage points)—within just one day this month. With long-term treasury yields soaring since the beginning of the year, the government's plan to issue additional treasury bonds and companies preparing to refinance corporate bonds are expected to face increased borrowing cost burdens.
According to the Financial Investment Association on the 2nd, the final bid yield (interest rate) for the 30th-year treasury bond the previous day rose by 10.0bp from the prior trading day to reach an annualized 4.627%. This daily increase marks the largest since June 1.
The 30-year treasury bond yield climbed to 4.751% on the 18th of last month, setting a record high since its issuance in 2012. Compared to 3.258% at the end of last year, this represents a jump of 136.9bp over approximately eight months.
The 10-year treasury bond yield reached 4.371% the previous day, rising by 98.6bp since the beginning of the year. Over the same period, the 3rd-year bond also increased to 3.878%, up by 92.5bp. The yields for both the 3rd-year and 10-year bonds have reached levels not seen in 2024 or last year.
As long-term government bond yields rose simultaneously in major countries including the United States, Japan, the UK, and Germany, upward pressure was also applied to domestic long-term bonds. Domestically, supply-demand pressures related to the auction of 30-year treasury bonds and concerns over next year's treasury issuance volume are cited as factors pushing up yields.
An Ye-ha, a researcher at Kiwoom Securities, stated regarding the government's treasury bond issuance plan for 2027: "Although total issuance is expected to decrease compared to last year, it will still remain at a high level, making it difficult to ease market supply pressures." He added, "The fact that treasury bond issuance exceeded market expectations also serves as a short-term factor driving up yields."
The 3-year yield for AA- rated corporate bonds rose by 107.3bp since the beginning of the year to reach 4.549% the previous day. The BBB- rated 3-year corporate bond yield also climbed by 104.4bp to 10.356%.
As market interest rates rise, not only will the government issuing new bonds face higher costs, but companies raising funds through corporate bonds are also expected to bear increased interest burdens.
An official from an investment bank (IB) stated: "AA-rated corporate bond yields have risen by 100bp since the beginning of the year, reducing companies' capacity to issue new bonds. At the same time, institutional investors find it increasingly difficult to actively absorb issuance volumes as bond prices decline."
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