Korean treasury bond yields declined on May 28 as foreign investors aggressively bought bond futures while the stock market triggered circuit breakers. The 3-year treasury yield fell 3.6 basis points to 3.829% and the 10-year yield dropped 4.4bp to 4.289%, driven by a second consecutive day of sharp oil price declines that eased inflation concerns. Foreign investors net purchased over 11,000 contracts of 3-year bond futures amid risk-off sentiment triggered by the KOSPI's 10% plunge to 6,023.66, which activated trading halts including sell-side circuit breakers during the session.
Treasury Yields Fall Across All Maturities on May 28
The 3-year Korean treasury bond's final bid yield stood at 3.829%, down 3.6bp from the previous session. The 10-year bond yield fell 4.4bp to 4.289%. The 3-year bond futures rose 12 ticks to 103.00, while 10-year bond futures climbed 38 ticks to 105.55. The 30-year bond futures increased 0.44 points to 107.10.
Bond yields opened the session with slight gains as traders took profits from the previous day's rally, but upward movement remained limited as international oil prices plunged and U.S. Treasury yields edged lower. Bonds that had been trading near flat turned bullish after sell-side circuit breakers and trading halts were triggered consecutively in the stock market.
Foreign Investors Net Buy 11,177 Contracts of 3-Year Bond Futures
Foreign investors net purchased 11,177 contracts of 3-year bond futures on May 28, while banks net sold 8,431 contracts. In the 10-year bond futures market, foreign investors net sold 2,440 contracts while banks net bought 1,098 contracts.
Foreign investors gradually increased their net buying of 3-year bond futures during the session, accumulating over 10,000 contracts. This marks the second consecutive day of large-scale net buying following their purchase of approximately 29,000 contracts the previous day.
KOSPI Triggers Circuit Breaker with 10% Decline to 6,023.66
The KOSPI closed at 6,023.66, down more than 10%, after falling below the 6,000 level near the session's end. The KOSDAQ plummeted nearly 8%. The dollar-won exchange rate closed the Seoul session at 1,462.50 won, down 6.0 won from the previous day—the lowest level since May 7.
Near the close of Asian trading, major U.S. Treasury yields fell by approximately 3bp. The ceasefire between the United States and Iran contributed to the second consecutive day of sharp oil price declines.
Bond Dealers Attribute Rally to Stock Market Crash
A bond dealer at a commercial bank stated, "Bonds appeared to show additional strength as the KOSPI plunged," adding, "Depending on how much further stocks fall, this favorable bond atmosphere could continue."
A bond dealer at a securities firm noted, "Both stock prices and the exchange rate are favorable factors for bonds, but the key is how Bank of Korea Governor Shin Hyun-song will react," while mentioning, "The stock decline may not be enough to modify the monetary policy path."
FAQ
What caused Korean treasury yields to fall on May 28?
Korean treasury yields fell on May 28 due to a combination of factors: international oil prices dropped for the second consecutive day (easing inflation concerns), the KOSPI stock index plunged over 10% triggering circuit breakers (creating risk-off sentiment), and foreign investors aggressively net bought 11,177 contracts of 3-year bond futures during the session.
How much did foreign investors buy in Korean bond futures on May 28?
Foreign investors net purchased 11,177 contracts of 3-year bond futures on May 28, marking the second consecutive day of large-scale buying after purchasing approximately 29,000 contracts the previous day. In the 10-year bond futures market, foreign investors net sold 2,440 contracts while banks net bought 1,098 contracts.
