Deputy Prime Minister and Finance Minister Lee Hyung-il chaired a joint market review meeting with financial and housing authorities to agree on the measures.
The government will consider further reductions in issuance depending on market conditions and may carry out emergency buybacks in coordination with relevant agencies, Lee said.
Bond yields fell following the announcement. At around 10:30 a.m., the three-year Korean government bond yield was down 5.1 basis points at 3.966 percent, while the 10-year yield fell 4.9 basis points to 4.390 percent.
The measures follow a surge in global borrowing costs that pushed Korea’s three-year government bond yield above 4 percent.
The U.S. 10-year Treasury yield rose above 5.2 percent in late September for the first time since June 2007 and reached around 5.34 percent on Thursday, its highest since 2002. The climb came as expectations for the Federal Reserve’s policy path shifted amid continued uncertainty in the Middle East and elevated oil prices.
Korean government bonds also came under pressure. The three-year yield rose above 4 percent in September for the first time since Nov. 1, 2023, while the 10-year yield reached 4.600 percent, its highest since Oct. 21, 2022.
The government warned that persistently high interest rates could increase refinancing burdens for lower-rated companies and said authorities would continue monitoring bond yields and issuance conditions.
The meeting was attended by Bank of Korea Governor Shin Hyun-song, Land Minister Hong Ji-sun, Financial Services Commission Chairman Lee Eog-weon and Financial Supervisory Service Governor Lee Chan-jin.
Officials also agreed to strengthen monitoring of potential spillovers between financial and housing markets, with particular attention to household debt and money moving between financial assets and real estate.
Seoul apartment price gains have slowed for five consecutive weeks, while housing permits and construction starts in the capital each increased more than 40 percent from a year earlier in the first eight months, according to the ministry.
The government also plans to announce further foreign-exchange deregulation measures under its won internationalization roadmap and complete revisions to foreign-exchange transaction rules by the end of the year.
AJP Takeaways
- South Korea will cut planned October government bond issuance by 5 trillion won as domestic bond yields remain elevated.
- The government said it could further reduce issuance and conduct emergency buybacks depending on market conditions.
- Authorities will monitor higher borrowing costs and potential spillovers across bond, housing and household debt markets.
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