Long-term government bond yields decline across the board... Expectations of a rate cut by the Bank of Korea increase.

As of January 6, 2026, the overall trend of government bond yields is downward. This means that in the bond market, yields on medium- to long-term bonds are decreasing, and bond prices are rising.

According to Seoul bond market reports, on that day, the 3-year government bond yield increased by 1.5 basis points (1bp=0.01%) compared to the previous trading day, closing at an annual rate of 2.948%. The short-term 3-year yield showed a slight increase, while yields on long-term bonds exhibited a downward trend. The 10-year yield rose by 0.2 basis points, recording an annual rate of 3.398%; the 5-year and 2-year yields fell by 0.5 basis points and 0.2 basis points respectively, closing at annual rates of 3.244% and 2.829%.

The decline in long-term bonds was more pronounced. The 20-year government bond yield fell by 1.4 basis points to an annual rate of 3.359%. Ultra-long bonds with 30-year and 50-year maturities also decreased by 2.6 basis points and 2.2 basis points, respectively, recording annual rates of 3.248% and 3.151%. The overall decline in long-term bond yields can be interpreted as investors expecting potential rate cuts or economic slowdown in the future, leading to a preference for long-term bonds.

Government bond yields reflect benchmark interest rates, inflation expectations, and supply and demand conditions in the bond market. The decline in medium- to long-term yields is often seen as a signal that the central bank—Korea Bank—may adopt easing measures. Recently, the U.S. Federal Reserve has maintained its interest rate stance, and concerns about a global economic slowdown have spread, leading to a similar trend in the Korean domestic bond market.

On the other hand, falling interest rates lead to rising bond prices. For bondholders, this results in an increase in asset value. Conversely, products that rely on interest income, such as bank savings or insurance, become less attractive. Therefore, the direction of interest rates has significant implications for household and corporate funding, financial investment strategies, and more.

This trend may become more pronounced as the Bank of Korea adjusts its monetary policy in the future. If inflation continues to remain stable and signs of economic slowdown become clearer, the likelihood of rate cuts will increase in the medium to long term. This will not only impact the bond market but is also expected to have ripple effects on the stock market, foreign exchange market, and other asset markets.