South Korea Treasury Bond 10Y Par Yield

KRKTB10 is the raw series that records the ten-year Korea Treasury Bond par yield exactly as quoted, without any transformation. The recorded value is the annualized yield-to-maturity at which a ten-year sovereign coupon bond trades at par, so that its coupon equals its yield.

This yield-to-maturity concept goes back to Macaulay (1938), who tied a bond's yield to its cash-flow-weighted average term, and that term measure was later formalized as the duration of Fisher and Weil (1971). A par yield at the ten-year node is one cross-section of the term structure, one that carries a forward-rate and liquidity-premium decomposition (Hicks 1939).

This yield is mechanically linked to the zero-coupon discount function recovered from coupon-bond prices, a recovery defined by McCulloch (1971) and refined for differential coupon taxation by McCulloch (1975). The smooth curve from which a par, zero, or forward rate of any maturity is read is fit by a parsimonious level-slope-curvature form, a two-hump extension, or an exponential spline (Nelson and Siegel 1987; Svensson 1994; Vasicek and Fong 1982). Its operational daily construction is described by Gürkaynak, Sack, and Wright (2007), and the competing estimators are compared by Bliss (1997).

Because a ten-year par yield at the long end embeds the average expected path of the overnight rate steered around an operating target, its level also inherits the policy anchor, whose corridor and standing-facility mechanics Bindseil (2004) sets out.

KRED applies no transformation to KRKTB10 and stores the ten-year par yield exactly as recorded, so the methodology is limited to the measurement basis by which such a yield comes to exist, and no rescaling, deflating, smoothing, or annualizing is applied.

A par yield is defined as the single discount rate equating the present value of a bond's coupons and principal to its price (Macaulay 1938), and that cash-flow timing is summarized by the duration measures of Fisher and Weil (1971).

The ten-year reading is one node of a fitted term structure, recovered from observed coupon-bond prices by the cubic-spline discount-function method of McCulloch (1971), the tax-adjusted refinement of McCulloch (1975), or the exponential splines of Vasicek and Fong (1982). Parametric construction instead imposes the level-slope-curvature function of Nelson and Siegel (1987) or the forward-rate extension of Svensson (1994), an approach operationalized for a daily sovereign curve by Gürkaynak, Sack, and Wright (2007). Bliss (1997) evaluates these competing estimators, and Hicks (1939) supplies the forward-rate identity tying the par yield to expected future short rates and a term premium.

The short-maturity anchor of that expected path is the overnight operating-target rate, whose construction across operating frameworks Borio (1997) documents.

As the long end of the sovereign term structure, the ten-year par yield carries the market's average expected path of future short rates plus a term premium. This forward-rate and liquidity-premium decomposition was formalized by Hicks (1939), and the long-yield series itself traces back to the data first assembled by Macaulay (1938).

Because the expected-short-rate component is anchored by the policy rate, the ten-year level depends on how the overnight rate is steered around an operating target. Its corridor and standing-facility mechanics are set out by Bindseil (2004) and surveyed across operating frameworks by Borio (1997), while the day-to-day fluctuations of the overnight rate are modeled by Bartolini, Bertola, and Prati (2002), Hamilton (1996), and Furfine (1999).

The slope from that short rate to the ten-year node is among the most-watched gauges of real activity and inflation expectations, read off a curve fit in the manner of Nelson and Siegel (1987), Svensson (1994), and Gürkaynak, Sack, and Wright (2007). The same yield also serves, through the discount-function mapping of McCulloch (1971), as the rate at which long-horizon public and private cash flows are valued.

In fixed-income practice the ten-year par yield is the benchmark discount rate and duration anchor for the long sovereign sector. The interest-rate sensitivity it implies is the duration of Macaulay (1938) and its term-structure-consistent refinement in Fisher and Weil (1971), used to immunize portfolios and hedge rate risk.

Traders read the ten-year node against a fitted curve to find relative value. That curve is fit by one of the parsimonious form of Nelson and Siegel (1987), the extension of Svensson (1994), the exponential splines of Vasicek and Fong (1982), the spline discount function of McCulloch (1971), or its tax-adjusted variant in McCulloch (1975), and how the chosen estimator changes the implied par, zero, and forward rates is documented by Bliss (1997).

Leveraged positions in the bond are financed at the secured repo rate and specialness characterized by Duffie (1996). The forward rates implied by the curve, in the sense of Hicks (1939) and Gürkaynak, Sack, and Wright (2007), price the carry and roll-down on a long-duration holding.

On the 6,308 daily observations spanning 2000-12-18 to 2026-06-10, fit with a constant and trend, the unit-root battery agrees that the ten-year 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 = 0.8573, the nonparametric Phillips and Perron (1988) test concurs with p = 0.7162, 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 I(1) 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 no break in the mean of the differenced yield, consistent with the parameter-instability inference 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 = 52.85 and Q = 86.00 and p = 0.000 in both cases, and the automatic portmanteau test of Escanciano and Lobato (2009) concurs with a statistic of 10.42 at p = 0.001, the short-horizon dependence expected of a daily yield change.

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).