Why Did KOSPI Drop to 6,900 After Chuseok? — The 5% Treasury Yield Shock

5.23%. One number erased the calm of Korea's Chuseok holiday. While the country was off from September 22 to 27, the US bond market hit a level it hadn't seen since 2007. By the time Korean traders came back to their desks, foreign and institutional investors had their fingers on the sell button — and they weren't waiting around.

What Happened in the US While Korea Was on Holiday?

During the Chuseok break, the yield on 10-year US Treasury bonds briefly touched 5.23% — the highest level since just before the 2008 global financial crisis. The move was driven by expectations that the Federal Reserve could raise interest rates up to three more times by mid-2027. One interesting wrinkle: US AI stocks actually held up well during the same period. Not everything was falling — the market was splitting in two different directions.

Why Does a Rising Interest Rate Push Stocks Down?

It comes down to opportunity cost — the idea that choosing one option means giving up another. US Treasury bonds are backed by the US government, making them about as safe as investments get. When those bonds are paying 5% a year, investors start asking a simple question: why take on the risk of stocks when I can earn solid returns in something this safe? When money flows toward bonds, it flows away from stocks. That's the basic logic driving global capital — and it's exactly what hit Korea's market when trading resumed.

What Happened on the First Day Back

On September 28, the first trading day after the holiday, KOSPI took an immediate hit. Foreign and institutional investors sold off more than ₩4 trillion worth of stocks in a single session, briefly pushing the index below 6,900. On top of that, rising geopolitical tension around Iran and the Strait of Hormuz sent oil prices higher — a second headwind hitting at the same time. Higher oil prices raise costs for businesses and weigh on the broader economy, adding another layer of pressure on an already rattled market.