South Korea Treasury Bond 1Y Par Yield

KRKTB1 is the raw one-year Korea Treasury Bond par yield recorded as quoted without any transformation, and the recorded value is the annualized yield to maturity at which a one-year government coupon bond prices to its face value. This yield-to-maturity concept links a bond's single discount yield to its cash-flow-weighted average term, and the par yield itself names the coupon rate at which a bond trades at par, so it sits as one point on the coupon-bearing term structure (Macaulay 1938).

This term structure is defined as a schedule of yields across maturities equal to expected future short rates plus a premium, and the one-year par-yield point is the maturity at which that schedule is constructed from on-the-run government quotes (Hicks 1939). The same market prices that define the par yield also imply the underlying discount function (McCulloch 1971), and this recovery extends to reflect tax and liquidity effects so that the recorded par yield and the zero-coupon yield read as two views of one estimated curve (McCulloch 1975). Parametric curve families fit this curve and return the par-yield level at the one-year node (Nelson and Siegel 1987; Vasicek and Fong 1982; Svensson 1994), and the daily construction procedure by which such par, zero, and forward values are computed is formalized (Gürkaynak, Sack, and Wright 2007).

Because a one-year bond discounts cash flows over the financing horizon, those flows are valued against repo-based discounting (Duffie 1996), and the one-year node sits close to the average expected overnight rate that the operating framework pins (Bindseil 2004). The recorded yield connects to realized bondholder return through duration (Fisher and Weil 1971), and this par-yield reading sits among the standard term-structure estimates that government desks compare (Bliss 1997).

A rise in the one-year par yield means the market prices a higher average expected short rate over the coming year.

KRED applies no transformation to KRKTB1 and stores the par yield exactly as recorded, so the methodology to describe is limited to the measurement basis by which a par yield comes to exist. No rescaling, deflating, smoothing, or annualizing is applied, and the daily quote is preserved at its recorded level.

A par yield is computed by inverting the standard bond pricing identity, namely the single annualized discount rate that equates the present value of a one-year government bond's coupons and principal to its market price (Macaulay 1938). This yield to maturity is the value at which the coupon is set so that the price equals par.

Because coupon bonds of nearby maturities trade simultaneously, the one-year par yield is read off the discount function recovered by cubic-spline estimation from the cross-section of coupon-bond prices (McCulloch 1971). This recovery is refined for tax and liquidity effects (McCulloch 1975), and the same discount function is also fit with exponential splines (Vasicek and Fong 1982).

The level-slope-curvature parametric form, extended with a second hump term, gives a smooth curve whose one-year par node is the quoted figure (Nelson and Siegel 1987; Svensson 1994). The daily smoothing procedure that turns off-the-run quotes into par, zero, and forward rates of any maturity is documented (Gürkaynak, Sack, and Wright 2007).

A comparison of these estimators shows the one-year par-yield reading is robust across methods (Bliss 1997). That yield connects to the duration governing price sensitivity (Fisher and Weil 1971), the discounting under which a deliverable bond's cash flows are financed is set out (Duffie 1996), and the forward-rate decomposition by which the par yield embeds expected short rates is given (Hicks 1939).

At a one-year horizon the par yield is dominated by the expected path of the policy rate, so KRKTB1 functions in macroeconomic analysis as a market reading of where the short rate is heading. The organizing identity holds that the one-year yield equals an average of expected overnight rates over the year plus a small term premium, which links the series directly to the operating-target framework (Hicks 1939).

The one-year par yield aggregates the market's forecast of the overnight rate that the central bank pins. A central bank pins the overnight rate through a corridor of standing facilities and open-market operations (Bindseil 2004; Borio 1997), and the day-to-day determination and volatility of that overnight rate anchoring the front end are modelled (Bartolini, Bertola, and Prati 2002; Hamilton 1996).

The gap between unsecured and secured funding is reflected in how the one-year yield embeds funding risk. The unsecured overnight rate is measured at the transaction level (Furfine 1999), and the secured repo rate at which the same expectations are priced is also set out (Duffie 1996).

The recorded yield to maturity is recovered from the model curve so that analysts can compare the one-year point to its model-implied expectations component (Macaulay 1938; McCulloch 1971). The curve construction lets the one-year par yield be gauged against neighbouring maturities for tightening or easing signals (Nelson and Siegel 1987; Gürkaynak, Sack, and Wright 2007).

In fixed-income practice KRKTB1 serves as the one-year benchmark on the government curve, the reference against which short-dated instruments are priced and hedged. Desks take as input the duration that converts the recorded yield into a price-sensitivity measure (Macaulay 1938), and extend it to the immunization rule by which a one-year liability is matched (Fisher and Weil 1971).

Desks read the one-year par point off the fitted curve, which is refined for coupon effects or fit with exponential splines (McCulloch 1971; McCulloch 1975; Vasicek and Fong 1982). The parametric forms let them interpolate the exact one-year node for discounting and relative-value trades (Nelson and Siegel 1987; Svensson 1994), and the resulting par, zero, and forward readings are mutually consistent across estimation methods (Gürkaynak, Sack, and Wright 2007; Bliss 1997).

Because the one-year yield closely tracks the expected policy rate, it is used to price money-market futures and overnight-indexed swaps (Bindseil 2004; Hamilton 1996), and the repo rate on the deliverable bond sets the financing cost that an arbitrageur subtracts when judging whether the one-year par yield is rich or cheap (Duffie 1996).

On the 6,523 daily observations spanning 2000-02-01 to 2026-06-10, fit with a constant and trend, the unit-root battery agrees that the one-year Treasury par yield is integrated of order one. The augmented Dickey-Fuller test of Dickey and Fuller (1979), in the ARMA-consistent lag-augmented form of Said and Dickey (1984) and with lag length set as in Ng and Perron (2001), does not reject a unit root with p = 0.2245, the nonparametric Phillips and Perron (1988) test concurs with p = 0.2291, and the Kwiatkowski et al. (1992) stationarity test rejects its trend-stationary null at p < 0.01, so the verdict is an unambiguous I(1). The GLS-detrended power escalation of Elliott, Rothenberg, and Stock (1996) is reserved for ambiguous outcomes under the house protocol and is not required on this clean reading.

Because the level is integrated, the mean-shift and serial-correlation diagnostics are run on the first difference, the stationary object those procedures require, since a break search or a portmanteau on an integrated level would spuriously segment and read near-unit autocorrelations (Bai and Perron 1998; Perron 1989). The multiple-break procedure of Bai and Perron (1998), computed by the dynamic-programming algorithm of Bai and Perron (2003), finds a single break in the mean of the differenced series, at 2004-12-08, read as parameter instability in the sense of Andrews (1993). The Ljung and Box (1978) portmanteau statistic, refining the original Box and Pierce (1970) form, is computed on the first difference and rejects the white-noise null at lags 10 and 20, with Q = 377.75 and Q = 493.65 and p = 0.000 and p = 0.000, and the automatic portmanteau test of Escanciano and Lobato (2009) concurs with a statistic of 99.12 at p = 0.000.

The series is daily and has no low-integer seasonal period, so the seasonal-unit-root machinery of Hylleberg et al. (1990) and the Canova and Hansen (1995) seasonal-stationarity test are inapplicable and are deliberately not run, the degeneracy of the seasonal auxiliary regression at a daily period being the standard ground (Beaulieu and Miron 1992; Ghysels and Osborn 2001).