Treasury bond yields rise; the Ministry of Economy and Finance19day cites interest-rate expectations
The Ministry of Economy and Finance19day said the recent rise in Treasury bond yields was not due to increased fiscal spending. It cited interest rates in major economies, expectations of higher inflation, the exchange rate, and expectations of a policy rate hike as contributing factors.
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The Ministry of Economy and Finance19day issued a press briefing note explaining the reasons for the recent rise in Treasury bond yields. It said the increase was not due to expanded government spending. It explained that the recent trend resulted from several financial market factors acting together.
The Ministry of Economy and Finance said Treasury bond yields move in tandem with interest rates in major economies. It explained that inflation expectations and the exchange rate also affect yields. It also cited investor risk aversion as a factor that moves Treasury bond yields.
The Ministry of Economy and Finance said global factors had played a major role in the recent rise in Korean Treasury bond yields. It explained that domestic interest rates may also move in tandem when overseas rates rise. This means the domestic bond market does not move independently of trends in overseas financial markets.
The Ministry of Economy and Finance also cited the strong growth rate as a factor driving interest rates higher. It explained that stronger growth could increase expectations that the Bank of Korea may raise its policy rate. It said these expectations of a policy rate hike pushed government bond yields higher still.
The Ministry of Economy and Finance stressed that it is difficult to directly link the rise in government bond yields to increased fiscal spending. Its position is that global interest rates, inflation expectations, the exchange rate, risk aversion and policy rate expectations are bigger variables than increased government spending. It explained that it is difficult to attribute the rise in interest rates to a single cause.
This explanation represents the government’s official position on interpretations of the recent rise in government bond yields. The Ministry of Economy and Finance said that government bond yields are affected by multiple market variables. It also cited expectations of a policy rate hike, driven by strong growth, as one factor behind the recent trend in interest rates.
Sources: 연합인포맥스
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