South Korea’s 10-year government bond yield rose to 3.76%, hitting its highest level since November 2023, amid concerns over renewed inflation pressures due to escalating tensions in the Middle East. The Bank of Korea noted on Friday that the resulting spike in oil prices may add to cost pressures in March, following data showing that February inflation came in slightly below expectations. Traders have since raised expectations for potential rate hikes but only see gradual policy tightening ahead. Some analysts, however, believe the central bank is unlikely to hike rates in response to higher-than-anticipated oil prices. Investors now look ahead to the release of fourth-quarter GDP data this week for further clues about the state the economy and the likely path of interest rates. Meanwhile, upward pressure on yields may be partially capped by expected foreign inflows associated with South Korea’s upcoming inclusion in an FTSE Russell index in April.
