[Today and Tomorrow] Higher U.S. and Japanese Rates Will Hit Korean Mortgage Interest

Global bond yields may sound like an issue for financial professionals, but they are not someone else’s problem. For ordinary people far removed from bond investing, higher rates can arrive through mortgage interest, business loans and corporate borrowing costs.

Government bond yields act as the financial market’s equivalent of Greenwich Mean Time. Just as the world sets its clocks by Greenwich, markets use government bond rates to shape the interest rates at which money is lent and borrowed.

If governments themselves must pay more to raise funds, companies and banks have to offer still higher rates to secure money. Individuals who rely on loans from those banks have little room to escape the impact.

The U.S. and Japanese government bond markets are now showing developments rarely seen in the past. The U.S. 10-year Treasury yield, which averaged around 2.9% annually over the past 20 years, has recently climbed to 4.8%. In Japan, the 10-year government bond yield has risen above 3% for the first time in three decades.

The fact that the world’s most powerful economy must pay more than 4% to borrow is a warning sign for Korean households carrying about 2,000 trillion won in debt. Higher global rates can travel directly into the interest bills of mortgage borrowers, self-employed people and companies.