Trend Long-term government bond yields stay sticky in 2026 and diverge in 2027

Summary

KIEP expects supply-driven inflation and fiscal burdens to keep long-term yields in major economies from falling in 2026, with paths diverging in 2027 according to each country's inflation, growth and policy response. US long-term yields are expected to be volatile as energy-driven inflation worries and growth concerns pull in opposite directions, though a cooling labour market should cap the rise after mid-2026. Europe, which relies heavily on imported energy, faces stronger and more entrenched upward pressure than the United States. In Japan, reduced Bank of Japan bond buying, possible further normalisation and the need to defend the yen point to a gradual rise in the 10-year yield. In Korea, energy-driven inflation risk pushes yields up while slowing household lending and macroprudential policy limit the increase.