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Rising US bond yields could pull down asset prices: vice minister

By Jung Min-kyung

Published : March 9, 2021 - 15:08

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Vice Finance Minister Kim Yong-beom (Yonhap) Vice Finance Minister Kim Yong-beom (Yonhap)
The recent surge in the US Treasury yields, if prolonged, could lead to a decline in asset prices, South Korea’s Vice Finance Minister said Tuesday, saying that the government would keep an eye on market volatilities.

“If the US bond yields continue to rise, volatilities including change in asset prices over avoidance of risky investments and an outflow of emerging market capitals could materialize,” Vice Finance Minister Kim Yong-beom said during a macroeconomics meeting.

“Both the domestic and overseas financial markets were able to recover in such a short period of time due to anticipations of an economic recovery, but the belief that the US and other major economies will maintain an accommodating monetary policy has contributed to the rebound as well,” he added.

Market watchers have been eyeing whether the US bond yields would change the mood of low interest rates since the yields are viewed as a yardstick for asset prices, Kim explained.

Buoyed by the rising US bond yields, the benchmark 10-year Korean government bonds came to 2.028 percent on Monday, up 3.6 basis points from the previous session. This marked the first time the yield surpassed the 2-percent mark since March 2019.

The 10-year US Treasury yield, meanwhile, traded at 1.598 percent on Monday, after hitting a high of 1.613 percent, after the US Senate passed a $1.9 trillion COVID-19 economic relief and stimulus bill on the weekends.

“With anticipations over economic recovery and concerns of an inflation coupled with rapid surge in interest rates, there is a possibility that market volatilities could continue – the government will closely monitor the matter and come up with countermeasures,” Kim said.

By Jung Min-kyung (mkjung@heraldcorp.com)