KOSPI Rally Stalls as Treasury Bond Yields Surge Following Hints of Rate Cut End

In early trading, the Korea Composite Stock Price Index (KOSPI) maintained gains of over 1%, but momentum slowed in the afternoon following news that the base interest rate would be held steady at 2.5% per annum. As of 2:30 p.m. on the 27th, the KOSPI was trading at 3,986.53, up 25.66 points (0.65%) from the previous session. The index opened at 3,989.45, a 0.72% increase, and climbed above the 4,023 mark in early trading before losing steam as the day progressed.
On the KOSPI Market, foreign investors and institutions purchased 148.3 billion and 381.5 billion won worth of shares, respectively. Meanwhile, individual investors showed a net selling position of 514.5 billion won.
By sector, metals (up 3.15%), entertainment and culture (up 2.29%), electrical and electronics (up 1.12%), and food, beverages, and tobacco (up 0.8%) showed strength. In contrast, IT services (down 2.10%), electricity and gas (down 1.28%), and securities (down 1.19%) declined.
Among large-cap stocks, Samsung Electronics (up 0.19%), SK hynix (up 3.05%), and Samsung Biologics (up 1.03%) posted gains. On the other hand, Hyundai Motor (down 0.19%), Doosan Enerbility (down 0.39%), and HD Hyundai Heavy Industries (down 0.18%) declined.
Overnight, U.S. stock markets closed higher, buoyed by renewed risk appetite amid expectations of a possible Federal Reserve System (Fed) chair replacement with a pro-Trump figure favoring rate cuts, as well as rallies in AI technology and semiconductor stocks.
Earlier in the day, the domestic stock market managed to reclaim the 4,000-point level on the back of foreign buying. However, after the Bank of Korea’s Monetary Policy Board announced its decision to keep the base rate at 2.50%, interpretations that this signaled the end of the rate-cutting stance led to a narrowing of gains.
In fact, the statement from the Monetary Policy Board’s policy direction meeting showed some changes. The Board stated, "While keeping the possibility of a rate cut open, we will closely monitor changes in domestic and external policy conditions, growth and inflation trends, and financial stability, and will decide on any further rate cuts and their timing accordingly."
Since initiating an easing policy with a rate cut last October, the Board had consistently included language in its statements indicating that it would maintain the rate-cutting stance while monitoring policy conditions, inflation, and financial stability to determine the timing and pace of further cuts.
However, this time, the stance shifted from a 'rate-cutting stance' to a 'possibility,' and the 'timing' of additional cuts was replaced by 'whether' further cuts would occur. This leaves open the possibility that additional cuts may not take place, depending on future financial conditions.
Sang Heon Lee, a researcher at iM Securities, explained, "After the Board's announcement, the outlook for further rate cuts has weakened, causing Treasury Bond yields and risk-free interest rates to rise. As a result, foreign investors who were net buyers in the morning have begun selling in the afternoon." He added, "Due to this announcement, the liquidity-driven market that began in May has lost some momentum."
Indeed, the yield on three-year Treasury Bonds rose to 2.948% in the morning session.
At the same time, the KOSDAQ Index was trading at 880.59, up 3.27 points (0.37%) from the previous session. The index opened at 879.44, a 0.24% increase.

nodelay@fnnews.com Park Ji-yeon Reporter