Despite Trump's Warning, U.S. Treasury Yields Surge Again, Pressuring Stock Markets

Trump Warns "Rates Are Too High,"
Yet U.S. 10-Year Treasury Surpasses 4.75%
Highest Level Since January Last Year
Global Stock Markets Face Mounting Pressure

Hawkish remarks from Federal Reserve (Fed) Chair Kevin Warsh and a surge in international oil prices drove the yield on the 10-year U.S. Treasury bond above 4.75%, putting pressure on global stock markets. U.S. President Donald Trump criticized the U.S. base interest rate as excessively high and effectively pressured Chair Warsh to cut rates, but the market continued to see a strong likelihood of a Fed rate hike in September.

Trump Calls for Rate Cuts... but 10-Year U.S. Treasury Yield Breaks 4.75%

On August 31 (local time), President Trump, when asked by reporters in the White House Oval Office whether he opposed Chair Warsh's suggestion of a possible rate hike, said, "No. I have a lot of respect for him, and he will do what needs to be done." However, he immediately reiterated his stance that current interest rates are excessively high. President Trump insisted, "I think we should be paying much lower rates than any other country in the world," emphasizing the need for lower rates.

President Trump also pushed back against the notion that economic growth necessarily triggers higher inflation. He asserted, "Success and growth do not cause inflation," adding, "You don't need to raise rates just because the economy is doing well; in many cases, you need to lower them." As Chair Warsh recently left open the possibility of further rate hikes to curb inflation, Trump's renewed public demand for a rate cut has once again highlighted tensions between the White House and the Fed over monetary policy.

On August 28, Chair Warsh declared at the Economic Policy Symposium in Jackson Hole, Wyoming, that "we have work left to do" if he does not gain confidence that inflation is headed toward the Fed's 2% target. This was widely interpreted as leaving the door open for additional rate hikes if inflation slows insufficiently.

Indeed, since Chair Warsh's remarks, expectations for a rate hike in September have been spreading rapidly in the market. According to CME FedWatch, the market reflects a 65.4% chance that the Fed will raise its base interest rate by 0.25 percentage points next month. This is a sharp increase from about 35% before Chair Warsh's Jackson Hole speech. Barclays revised its outlook after Warsh's comments, now expecting the Fed to raise rates by 0.25 percentage points each in September and again in December.

Contrary to President Trump's calls for a rate cut, market yields have risen sharply. On the U.S. Treasury market, the benchmark 10-year Treasury yield surged intraday to 4.765%, the highest level since January 15 last year. The five-year Treasury yield also hit its highest point since early last year. The resurgence of military conflict between the United States and Iran and the resulting surge in international crude oil prices further weighed on the bond market. On this day, West Texas Intermediate (WTI) crude jumped over 2%, exceeding $85 per barrel, while Brent crude traded above $90.

On the overnight U.S. New York stock market, concerns over interest rates led to declines. The Dow Jones Industrial Average fell 0.70%, while the S&P 500 Index and the Nasdaq Composite Index dropped 0.33% and 0.12%, respectively.

The KOSPI index opened at 6,784.29, down 35.73 points from the previous trading day, displayed on the electronic board showing the domestic stock market status at the Hana Bank headquarters dealing room in Jung-gu, Seoul on September 1, 2026. Photo by Kang Jinhyung

KOSPI Flat as Samsung Electronics and SK hynix Launch Major Share Buybacks

However, the KOSPI showed a slight upward trend, particularly led by large semiconductor stocks actively purchasing their own shares. On September 1, the KOSPI opened at 6,784.29, down 0.52% from the previous session, but then reversed course and was trading up 0.32% at 6,842.09 as of 10:03 a.m. At the same time, the KOSDAQ was trading at 826.16, down 0.97%.

As of 10:04 a.m., SK hynix was trading at 1,701,000 won, up 1.61% from the previous trading day, and Samsung Electronics was at 261,000 won, up 0.38%. The two companies' combined share buybacks have surpassed a daily average of 1 trillion won, and market watchers say this is helping to limit the stock market's drop. Kang Jinhyuk, a researcher at Shinhan Securities, explained, "In these unstable macroeconomic conditions, the large-scale buybacks by Samsung Electronics and SK hynix are serving as a pillar of support for Korea's stock market."

As the market correction continues, the KOSPI 200 Volatility Index (VKOSPI), often called Korea's 'fear index,' has fallen to its lowest level in six months. According to the Korea Exchange, the VKOSPI closed at 46.05 the previous day, the lowest since it hit 43.87 on February 20. The VKOSPI indicates investor expectations for future volatility in the domestic stock market. Typically, when the stock market plunges or becomes highly volatile, the VKOSPI rises, and when stability returns, the index declines or moves sideways.

After hitting a record high of 96.94 on June 29, the VKOSPI has plummeted to less than half that level. Following the launch of new single-stock leveraged ETFs tracking Samsung Electronics and SK hynix at the end of May, volatility in the market initially surged, but as corrections and new regulations on these ETFs were imposed, volatility has since subsided.

The sharp drop in investor deposits amid the market correction has also contributed to decreased volatility. According to the Korea Financial Investment Association, investor deposits—funds waiting to be deployed in the market—stood at 99.8138 trillion won as of August 28. This represents a decline of about 40 trillion won from the record high of 139.6947 trillion won set on June 4.

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