Yields Hit Multi-Month Highs

10-Year yield higher, hitting the highest level since November and close to hitting the highest since 2018 at 2.203% as inflation rises at the fastest pace in nine years at 2.6%, sparking speculation that the BoK will be forced to raise rates to reign in prices. Also weighing on bonds are reports from earlier this week that the DPP will seek additional fiscal measures, including another budget, this year. Reports of an additional budget were denied by the finance ministry in May, but floor leader Yun Ho-jung raised the prospect again on May 31. The comments take on extra significance when taken in tandem with rhetoric from President Moon who said on May 27 that expansionary spending should be on the cards in 2022. "The expansionary fiscal stance should be maintained through next year to secure a clear economic rebound and ease inequalities caused by Covid-19" said Moon. Korea has implemented five extra budgets to cushion the pandemic shock, including one this year, though Moon intimated that additional spending should be financed by tax revenue.