The trend of government bond interest rates is chaotic... short-term fall, long-term rise, making it difficult to determine the market direction.

On the 22nd, the Seoul bond market showed a mixed and chaotic trend in government bond yields, which varied by term. This was interpreted as a result of the interplay between adjustments to domestic and foreign interest rate cycles and future economic prospects, leading to a lack of clear direction in investor expectations.

On that day, the 3-year government bond yield fell by 1.1bp (1bp=0.01 percentage points) compared to the previous trading day, closing at an annual rate of 2.999%. The decline in short-term yields, which are sensitive to the benchmark interest rate, seems to reflect the recent stance of the Bank of Korea in maintaining its monetary policy tone and expectations for price stability. At the same time, this is also interpreted by some as a concern over a short-term economic slowdown.

On the other hand, in the long-term bonds, the yield on the 10-year government bond rose by 1.7bp, reaching 3.359% annually, showing an upward trend. The rise in long-term yields is analyzed as the market considering that price pressures may rise again in the long run, or influenced by fluctuations in global bond market yields. In particular, fluctuations in U.S. Treasury yields often directly reflect on domestic long-term bond yields.

In other major bond aspects, the 5-year rose by 0.5bp to an annual 3.245%, while the 2-year fell by 1.3bp to end trading at an annual 2.823%. Among ultra-long-term bonds, the 20-year slightly decreased to an annual 3.337%, and the 30-year and 50-year closed at annual 3.249% and annual 3.153%, respectively. This trend overall reflects differences in yield movements across maturities, also indicating structural changes such as flattening or steepening of the curve.

In the market, whether the Federal Reserve and the Bank of Korea will cut interest rates next year has become the most important variable. With the consumer price inflation rate not yet considered fully stable, the market is cautiously seeking direction.

The chaotic trend of yields on such bonds may show a clearer direction in the future, depending on the pace of economic recovery and the tone of central bank policies. If monetary policy easing signals become more concrete in the first half of next year, a decline in yields primarily for short-term bonds may officially begin; conversely, if there is an emphasis on the recovery of prices and growth momentum, the volatility of long-term bond yields may increase.