Bond yields fluctuate with economic momentum. Korea’s export dependence makes its economy especially sensitive to shifts in the global cycle. Its bond yields, therefore, often lead movements in US Treasuries.
For example, Korean 10-year yields plunged by 60 basis points between February and March, bucking a rising trend in the US. This proved a timely warning of an April peak and subsequent big decline in Treasury yields – see chart.
The two markets are now diverging again, with 10-year Korean yields up by 60 basis points over the last three weeks versus little change in the US. If the Korean rise reflects stronger global / US economic momentum, Treasury yields should follow, notwithstanding Fed buying.
