BOK holds market review meeting after Chuseok break

US 10-year Treasury yield rises 20 bp

Bank vows close watch on US-Iran talks, other external risks

Bank of Korea Deputy Governor Kwon Min-su. [Bank of Korea]
Bank of Korea Deputy Governor Kwon Min-su. [Bank of Korea]

The Bank of Korea reviewed movements in global financial markets during the Chuseok holiday, including a sharp rise in US Treasury yields, and assessed the potential impact on domestic financial and foreign exchange markets. With external uncertainty rising on expectations of Federal Reserve rate hikes and heightened tensions in the Middle East, the central bank said it would monitor market volatility closely.

The Bank of Korea held a market review meeting at 8 a.m. Monday, chaired by Deputy Governor Kwon Min-su, to assess international financial market developments during the Chuseok holiday from Thursday through Sunday. Kwon said that while movements in major equity markets and the dollar were relatively modest over the holiday period, global government bond yields rose considerably, driven by shifting expectations around monetary policy. The bank assessed that uncertainty in international financial markets had increased further.

Around the holiday period, from Wednesday through Friday, the yield on the 2-year US Treasury note rose 10 basis points (1 bp = 0.01 percentage point) and the 10-year yield climbed 20 bp. German and British 10-year government bond yields also rose, by 14 bp and 13 bp respectively. Over the same period, the US S&P 500 fell 0.3 percent and the NASDAQ fell 0.6 percent, while the dollar index (DXY) gained 0.4 percent.

Movements in Korean assets were limited. The won weakened 0.1 percent against the US dollar on the offshore non-deliverable forward market. Foreign exchange authorities have stepped up monitoring of NDF transactions, which they see as vulnerable to speculative activity that could amplify exchange rate volatility. South Korea's credit default swap premium held at a low 23.6 bp on Friday.

Kwon said domestic economic fundamentals remain sound, but cautioned that volatility in domestic financial and foreign exchange markets could expand depending on how external risk factors develop — including US-Iran negotiations, concerns over fiscal health in major economies, and shifts in expectations around the AI industry. He added that the bank would monitor market conditions closely with a heightened sense of alert.


forest@heraldcorp.com