Government Bond Yields Rise on Renewed Middle East War Fears... 3-Year Bonds at 3.887% Per Annum

On July 14, government bond yields in South Korea rose across the board after news broke that the United States had resumed its maritime blockade against Iran, driving up international oil prices.

On this day, in the Seoul bond market, the yield on three-year government bonds closed at 3.887% per annum, up 7.8 basis points (1bp = 0.01 percentage point) from the previous trading day. This is only about 5bp away from the annual high of 3.940% recorded on June 8.

The yield on ten-year bonds increased by 7.0bp to 4.333%. The yields on five-year and two-year bonds respectively rose by 8.7bp and 8.2bp, recording 4.128% and 3.763%. The twenty-year bond climbed 6.9bp to 4.492%. The yields on thirty-year and fifty-year bonds increased by 4.5bp and 4.6bp, ending at 4.491% and 4.389%, respectively.

This rise in government bond yields is attributed to the surge in oil prices and deteriorating investor sentiment, as U.S.-Iran tensions in the Strait of Hormuz reached a new peak. The United States Central Command (CENTCOM), which oversees U.S. operations in the Middle East, announced on July 13 (local time) that it had carried out nightly airstrikes against Iran for three consecutive days on the orders of Supreme Commander President Donald Trump. As both sides returned to a standoff reminiscent of pre-memorandum of understanding (MOU) days, concerns about the resumption of war heightened further.

As a result, the settlement price for September delivery crude oil futures on the ICE Futures Exchange jumped 9.6% from the previous trading day to $83.30 per barrel overnight. August delivery West Texas Intermediate (WTI) futures also rose by approximately 9.4% ($6.73) in New York trading, and gained more than 3% ($2.40) in Asian trading on this day, surpassing the $80 per barrel threshold.

Additionally, market sentiment appeared to be affected by caution regarding the Bank of Korea’s expected base rate hike at the Monetary Policy Board meeting scheduled for July 16, as hawkish (monetary tightening) signals persisted.

This content was produced with the assistance of AI translation services.