3-Year Government Bond Rate Projected at 3.78%, Additional Tightening Pace Expected to Slow

The September interest rate forecast for the 3-year government bond has been set at 3.78%. This reflects expectations that the pace of additional tightening will slow following the Bank of Korea's two rate hikes. According to a survey by Yonhap Infomax, the 10-year bond rate is expected to be 4.26%, which is 1.5 basis points and 2.5 basis points lower than the previous trading day's market rates, respectively. The Bank of Korea raised the benchmark interest rate from 2.75% to 3.00% in its August monetary policy direction. Experts anticipate that despite the rate hike, expectations for a moderation in monetary tightening will lead to some reversal in market rates. Following consecutive rate increases in July and August, expectations for a freeze in the fourth quarter have formed, and if the final benchmark rate is maintained at 3.25%, the 3-year bond rate could show a temporary decline with a peak at 3.90%. However, the extent of the rate decline is expected to be limited. Experts point out that the possibility of the final benchmark rate rising to 3.50%, along with long-term interest rate increases and concerns over fiscal expansion, are constraining factors. The 10-year bond rate is expected to be influenced not only by the Bank of Korea's policies but also by U.S. Treasury yields, global term premiums, and domestic fiscal policies. The flow of bond rates could also be an important variable for domestic cryptocurrency investors.