The spread between South Korean and US bond yields is rapidly approaching 200 basis points, adding insult to injury to the South Korean won.

The yield of South Korean government bonds relative to US government bonds has continuously fallen to historic lows, putting further pressure on the South Korean won which has already been hit by a political crisis. The yield spread between South Korean 10-year government bonds and US 10-year government bonds widened to about 190 basis points this week, with some analysts believing that considering potential dynamics, the spread will exceed 200 basis points. Since mid-last year, due to economic downturn, South Korean bond yields have been declining, with the pace of decline accelerating after the surprise rate cut by the Bank of Korea in November last year. The spread between South Korean and US bonds is approaching 200 basis points. Kim Sungsoo, an analyst at Hanwha Investment & Securities, stated: "There are no particularly favorable factors for the South Korean economy in 2025. The Bank of Korea has reiterated its flexibility and is expected to continue lowering interest rates. South Korean bond yields are also expected to continue to decline." The benchmark 10-year South Korean government bond yield closed at 2.79% on Tuesday, lower than the high of 3.71% set in April last year. On Tuesday, the yield of US 10-year government bonds closed at 4.685%. The widening discount on South Korean government bond yields is just one factor contributing to the weakening of the South Korean won. Due to the martial law incident in early December last year, the South Korean won has fallen by over 7% in the past three months, making it the worst-performing currency in Asia. Kong Dongrak, an analyst at Daishin Securities, suggested that the yield spread between South Korean 10-year government bonds and US government bonds may continue to widen to around 200 basis points. However, he noted that as US government bond yields excessively rise, at some point the spread should start to narrow again.