US Treasury Secretary Scott Bessent [AFP]
US Treasury Secretary Scott Bessent [AFP]

A majority of market participants now expect the US 30-year Treasury yield to breach 6% before year-end — a level not seen since June 2000 — according to a Bloomberg Markets Pulse survey published Thursday (local time). Of the 173 respondents polled this week, 53 percent said the 30-year yield would climb above 6% by the end of the year.

The 30-year yield has firmly exceeded 5% since this summer and currently hovers around 5.44%. The share of respondents expecting a break above 6% rose 11 percentage points from the same survey last month. Three-quarters of participants identified a surge in energy prices or broader inflation costs as the biggest risk to the bond market over the coming months.

Oil, diesel prices surge as bond market pressures White House

The recent wave of Treasury selling began as oil prices climbed again, driven by renewed US-Iran tensions following a brief truce. Brent crude futures approached $110 a barrel this month, nearing the peak reached during the height of the conflict last May. A Reuters report that the US and Iran were discussing a deal to reopen the Strait of Hormuz briefly pushed prices back from their intraday high, but the pullback proved short-lived.

US diesel prices also hit an all-time high, surpassing $6.50 per gallon, stoking inflation fears and prompting calls for the Trump administration to restrict diesel exports. About two-thirds of survey respondents, however, said such a ban would ultimately push both Brent crude prices and Treasury yields higher.

"The moves of the last few weeks are a much more malignant dynamic," Marko Papic, head of geopolitical and macro strategy at BCA Research, told Bloomberg TV. "It's not because of growth — it's because of the Iran conflict, and the bond market is pressuring the White House to end it."

Fed hike pushes 5-year yield to 20-year high

The Federal Reserve raised interest rates this month for the first time since 2023. With oil prices rebounding simultaneously, yields across most maturities climbed above 5% — the threshold that respondents in an earlier survey identified as a potential trigger for a stock market correction.

"Rate traders are treating the Fed's September hike as the start of a longer tightening cycle," Bloomberg macro strategist Michael Ball said. He added that the entire yield curve was under simultaneous pressure from volatile oil prices, a Congress unwilling to address the fiscal deficit, and a flood of government bond supply from around the world.

The 5-year yield also surpassed 5% this week, soaring to its highest level in roughly 20 years. Survey respondents' median year-end forecast for the 5-year yield stood at 5.25%, which, if realized, would be the highest since December 2000.

Korean stocks repeatedly rattled by US rate moves

The pressure on South Korean equities has been mounting. Foreign investors have repeatedly pulled funds from the local market whenever US Treasury yields spike, a pattern that has recurred throughout this year.

On Aug. 19, the 30-year US Treasury yield hit 5.337%, its highest since 2007, and the Kospi tumbled 5.80% in a single session. Foreign investors net sold 3.5 trillion won ($2.57 billion) worth of shares, while institutional investors net sold 1.32 trillion won. Samsung Securities attributed the selling pressure to a combination of concerns over rising Treasury supply stemming from the widening US fiscal deficit and additional bond issuance by AI companies to fund data center investment.

On Sept. 15, the Kospi fell 0.85% after the 10-year US Treasury yield briefly topped 5% during trading. Foreign investors net sold more than 3 trillion won across equities and futures combined. The won-dollar exchange rate closed 13.1 won weaker at 1,359.3 won per dollar. Between Sept. 9 and Sept. 16 — six trading sessions — foreign investors net sold 11.7 trillion won worth of Kospi-listed shares, with 95.5% of that concentrated in SK hynix (6.29 trillion won) and Samsung Electronics (4.88 trillion won).

Noh Dong-gil, a researcher at Shinhan Securities, said of the semiconductor selloff: "Rather than reflecting a sharp deterioration in corporate orders or sales forecasts, it largely reflects the possibility of demand slowdown that could emerge going forward."

The picture varied by sector. Growth stocks such as semiconductors and insurance shares — whose future earnings lose present value as rates rise — came under pressure, while bank stocks strengthened on expectations that higher rates would widen net interest income. On Thursday, the day after the Fed's rate hike, KB Financial Group rose 1.87% and Hana Financial Group gained 1.98%. Even as foreign investors sold semiconductor stocks, they bought into energy names such as SK Innovation and GS, as well as financial stocks including Woori Financial Group and Hana Financial Group.

First trading day after holiday seen as key test

South Korean markets are closed for the Chuseok holiday. The Kospi ended up 0.90% at 7,080.92 on Wednesday — the last trading session before the break — while Samsung Electronics closed up 3.28% at 285,500 won per share. Overseas variables including US Treasury yields, oil prices and the outcome of Middle East negotiations will continue to move during the holiday and will all be priced in at once when markets reopen Monday.

Historical data offers some grounds for optimism. An analysis by Daishin Securities of 22 Chuseok holidays between 2004 and 2025 found that the Kospi rose in the five trading sessions following the break on 15 occasions, or 68 percent of the time. However, if the 30-year US Treasury yield continues its march toward 6% and oil prices remain elevated as the survey suggests, foreign selling of semiconductor stocks and upward pressure on the exchange rate could intensify again. That is why the market is closely watching the outcome of US-Iran negotiations over the Strait of Hormuz and the direction of US Treasury yields.


why37@heraldcorp.com