South Korea’s AI chip boom is so strong it’s crushing the bond market
TL;DR
South Korea’s government bonds have lost 7.5% in 2026, the worst of any sovereign market globally, as the AI chip boom drives growth, inflation, and bets on at least three BOK rate hikes. On Monday the Kospi fell 8%, triggering a circuit breaker, while bond yields held near highs.
The AI boom that has made Samsung and SK Hynix trillion-dollar companies and sent the Kospi up roughly 80% is doing something unusual to South Korea’s bond market: destroying it.
Korean government bonds have lost 7.5% in 2026 in local-currency terms, the worst performance among 44 sovereign markets tracked by Bloomberg. The benchmark three-year yield has climbed to about 3.9%, its highest level since 2023. The swaps market is pricing in at least three rate hikes this year, which would take the Bank of Korea’s policy rate from 2.5% to 3.25%.
The cause is a growth story too strong for...
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