In April, the global financial market saw Government Bonds yields in major countries rise as concerns grew worldwide over inflation due to the Middle East war. Expectations strengthened that Central Bank in major economies would raise their policy rates because of inflation worries.
The Bank of Korea announced on the 15th its report, Trends in global financial and foreign exchange markets after April 2026. In the United States, the expected number of policy rate hikes within the year rose to 0.4 as of the 13th from minus (-) 0.29 at the end of March. Markets that had expected a rate cut shifted their view to a higher likelihood of a hike. The U.S. Government Bonds 10-year yield, which reflects market expectations for the policy rate, was around 3.9% even before the U.S.-Iran war, but soared to 4.494% the previous day.
Japan also saw its Government Bonds 10-year yield rise to as high as 2.6% on inflation concerns, a record high in 29 years since May 1997. In the United Kingdom, political turmoil compounded the situation, and the 20-year and 30-year Government Bonds yields were the highest since 1998. U.K. Prime Minister Keir Starmer is facing intense pressure to resign after a crushing defeat in local elections.
In April, the foreign exchange market saw a weaker dollar as consumer sentiment deteriorated. The won-dollar exchange rate against the U.S. dollar fell at one point to the 1,450-won level on hopes for a U.S.-Iran peace deal, but the decline narrowed due to net selling of domestic stocks by foreigners. When foreigners sell domestic stocks and exchange into dollars, dollar demand increases, creating upward pressure on the won-dollar rate.
In April, the net outflow of foreign investment funds from Korea's domestic securities was $2.13 billion, smaller than March's $36.55 billion. While $2.68 billion flowed out of stocks on net, $550 million flowed into bonds on net. As U.S.-Iran peace talks proceeded, investor sentiment partly recovered.