South Korea Treasury Bond 5Y Par Yield

KRKTB5 is the raw five-year Korea Treasury Bond par yield, recorded as is and carried through without any transformation, smoothing, or interpolation, the quoted annualized yield-to-maturity at which the on-the-run five-year coupon government bond trades at par.

A par yield is the single discount rate that equates the present value of a coupon bond's scheduled cash flows to its face value, and this yield-to-maturity concept has its empirical grounding in work linking a bond's yield to its cash-flow-weighted average term (Macaulay 1938).

Because the five-year yield sits on the coupon-bearing par curve, its level is conceptually the value that a parametric fit would assign to the five-year node (Nelson and Siegel 1987; Svensson 1994). The same par yield is equivalently recovered from the companion discount-function and zero-coupon representations (McCulloch 1971, 1975; Vasicek and Fong 1982), and it is likewise defined through the full term structure of zero rates (Fisher and Weil 1971). The daily mapping among par, zero, and forward yields is set out in operational form, and the five-year benchmark anchors that mapping (Gürkaynak, Sack, and Wright 2007).

The term-structure meaning of this maturity implies that the five-year yield embeds expected future short rates plus a maturity premium (Hicks 1939). In this respect the five-year par yield is distinct from the overnight financing rate (Duffie 1996) and from the policy-controlled short rate (Bindseil 2004).

The series is therefore a clean market observation rather than a fitted construct, and it preserves the level that a cross-method fitting comparison would summarize (Bliss 1997).

KRED applies no transformation to KRKTB5, performing no rescaling, deflating, smoothing, rebasing, annualizing, or curve-fitting. The published number is therefore the par yield itself, generated by the standard yield-to-maturity convention that defines the series into existence.

Under that convention a bond's price and its par yield are tied by discounting scheduled coupons and principal, and the duration mapping of that present-value relationship was established early (Macaulay 1938). The generalization of the same relationship to zero-coupon rates is also set out (Fisher and Weil 1971).

The five-year par node is the maturity at which the coupon-bearing par curve is read. How such a curve is estimated from traded bond prices has been formalized in several ways, and the cubic-spline discount function and its tax-adjusted refinement (McCulloch 1971, 1975), the exponential splines (Vasicek and Fong 1982), the parsimonious level-slope-curvature form (Nelson and Siegel 1987), and the extended two-hump form (Svensson 1994) all imply a five-year par yield consistent with the observed quote. The daily construction by which par, zero, and forward yields of any maturity are computed from a smoothed curve is also documented (Gürkaynak, Sack, and Wright 2007), and how these competing estimators are evaluated has likewise been laid out (Bliss 1997).

The raw five-year par yield is therefore the model-free input that these procedures would otherwise reproduce. The measurement basis is the par yield-to-maturity itself, and its term-structure interpretation (Hicks 1939) and the broader rate-measurement context (Bindseil 2004) are supplied by the external literature rather than by any KRED-side computation.

As a medium-term benchmark, the five-year par yield decomposes into the average expected path of future short rates plus a maturity premium, and this term-structure information was defined early (Hicks 1939). Its level reads as the market's medium-horizon view of the policy-rate trajectory (Bindseil 2004; Borio 1997).

The front of that path is fixed by the short rate, which is governed by central-bank steering of the overnight rate and its daily determination (Bartolini, Bertola, and Prati 2002; Hamilton 1996). The secured-financing counterpart of the same short rate (Duffie 1996) and the transaction-level measurement of the unsecured benchmark (Furfine 1999) are also formalized.

Movements in the five-year node trace how expectations formed along this corridor feed into medium-term borrowing costs. Its curve representation is parameterized (Nelson and Siegel 1987; Svensson 1994), and its zero-coupon decomposition is made explicit (Gürkaynak, Sack, and Wright 2007).

Because the par yield is a coupon-curve reading, the duration relationship translates its level into the interest-rate sensitivity that households and firms face at the five-year horizon (Macaulay 1938; Fisher and Weil 1971). The same information is equivalently expressed as a discount function (McCulloch 1971).

The five-year yield thus serves as a summary statistic for medium-term financial conditions consistent with the operating-procedure framework (Borio 1997).

In portfolio practice the five-year par yield is the discount-rate input for pricing and risk-managing medium-term bond exposure. The duration concept converts a yield change into a price change (Macaulay 1938), and the immunization result matches asset and liability sensitivities across the term structure (Fisher and Weil 1971).

Relative-value and curve trades reference the five-year node against neighboring maturities, which are fitted by spline estimators (Nelson and Siegel 1987; Svensson 1994; McCulloch 1971, 1975; Vasicek and Fong 1982). How these construction choices alter the implied yield used for marking has been catalogued (Bliss 1997).

The zero-coupon and forward decomposition lets desks strip the five-year par yield into the discount factors that price structured cash flows (Gürkaynak, Sack, and Wright 2007). The forward-rate framing behind carry-and-roll and forward-rate-agreement positioning is also in place (Hicks 1939).

Financing of the underlying bond runs through the repo market by way of the overnight rate. The specialness of that market is defined (Duffie 1996), and the overnight rate is measured and modeled (Hamilton 1996; Furfine 1999; Bartolini, Bertola, and Prati 2002). The five-year yield and its repo cost therefore jointly determine the net carry a leveraged holder earns.

The benchmark thus functions simultaneously as a pricing reference, a hedging instrument, and a collateral asset.

On the 6,543 daily observations spanning 2000-01-04 to 2026-06-10, fit with a constant and trend, the unit-root battery agrees that the five-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 = 0.2044, the nonparametric Phillips and Perron (1988) test concurs with p = 0.1268, 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 no break in the mean of the differenced series, 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 = 78.81 and Q = 120.48 and p = 0.000 and p = 0.000, and the automatic portmanteau test of Escanciano and Lobato (2009) concurs with a statistic of 13.44 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).