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Korea Investment & Securities: AI Boom Pressures Long-Term Yields, Suggests Shift in Bond Issuance
Finance · Investment Banks/Brokers · yonhap_finance · 2026-09-02
Korea Investment & Securities advises a shift toward short-term government bond issuance to mitigate rising long-term yields driven by the AI investment boom.
What Happened
AI Investment and Yield Pressure: The surge in AI infrastructure investment is stimulating aggregate demand and driving up prices for power and raw materials, creating inflationary pressure. This environment suggests that central banks may maintain high interest rates for longer, increasing the upside risk for real neutral interest rates.
Long-Term Bond Supply-Demand Imbalance: Increased issuance of long-term corporate bonds by global tech giants is crowding out demand for long-term government bonds among institutional investors like pension funds and insurers. This dynamic is pushing up term premiums, leading to structural upward pressure on long-term yields.
Need for Strategic Shift: Analyst Ahn Jae-kyun points out that South Korea has a high proportion of ultra-long-term government bond issuance and suggests shifting the focus toward short-to-medium-term bonds under 10 years. While this may increase interest expense burdens, it is considered a necessary measure to stabilize the market and financial conditions.
Key to Market Stability: The ability of governments to reduce the proportion of long-term bond issuance will be the decisive factor in resolving supply-demand instability in the bond market. Korea needs to adopt a more flexible issuance strategy to align with these global trends and ensure domestic market stability.