U.S. Treasury Yields Hit Their Highest Since 2007…Semiconductors Steady Stocks as Rate Pressures Mount

The KOSPI opened at 6,859, down more than 0.4% intraday, and extended its decline to 0.8%, reaching 6,833. The KOSDAQ also traded around 841, down 0.4% to 0.5%. Through the late session, only around 140 KOSPI-listed stocks were higher.

Foreign investors recorded net sales of more than KRW 1.2 trillion on the KOSPI and more than KRW 100 billion on the KOSDAQ, and sold futures for a second consecutive day. The won-dollar exchange rate edged down to KRW 1,359, but was cited as a variable to continue monitoring alongside movements in the dollar index.

U.S. equities weakened as Treasury yields rose, while the Philadelphia Semiconductor Index fell more than 1.6%. In South Korea, Samsung Electronics held firm, gaining slightly by more than 0.5%, and stocks related to semiconductor materials, components, equipment and substrates performed relatively well. Jensen Huang's remarks on AI infrastructure supported related stocks.

Meta's AI assistant Muse, built on its existing AI model Muse Spark, helps users organize email, fill out online forms, shop and make reservations. The service launched first in the United States, where it is available for free, with a paid subscription also offered. Users have responded favorably to its ability to handle travel itineraries and bookings.

Muse surpassed 3 million downloads in its first 15 days. Over the same period, ChatGPT was reported to have around 1.6 million downloads and Gemini around 340,000. Meta shares have risen 36% since the start of September and also performed strongly last week among major technology stocks.

The market is watching to see whether user growth signals the potential returns on Meta's AI investment and its ability to monetize the service. Meta also unveiled AI glasses and a necklace-style device called Muse Charm. Share prices have reflected expectations that the company could attract users with a free service, expand its platform and then generate revenue.

Nvidia expanded its share buyback authorization to $150 billion. The authorization sets a limit but does not commit the company to buying back the full amount; the actual scale of purchases can be assessed at its earnings release and conference call scheduled for November 17. The move was interpreted as reflecting both a perception that the stock had not met expectations and confidence in future earnings.

Even as semiconductor stocks fell in the U.S. market, Nvidia gained more than 1.6% and held its market capitalization at $5.5 trillion. Reports that Chinese authorities may approve some companies' purchases of Nvidia GPUs also supported the stock. China revenue is not sufficiently reflected in existing earnings forecasts, so a resumption of actual sales could provide an additional growth driver.

The use of foreign-made chips in Chinese data centers is restricted, and domestic chip supplies are also reportedly insufficient. However, demand assessments should take into account that Chinese companies are already sourcing Nvidia chips through Southeast Asia and that the products eligible for export are lower-performance models designed for China. Data-center expansion also faces constraints on power and available sites, with some areas, including Singapore, restricting new construction because of power shortages.

OpenAI decided to delay the launch of its next-generation model, Astra 6.1. The reasons cited included the model continuing tasks without user permission, exceeding the scope of its authorization for external tools and services, and failing to inform users of its actions. Similar safety concerns arose with an earlier model, making the launch schedule dependent on whether these issues are addressed.

Attention is focused on whether OpenAI will unveil a new model, hardware and other product and business plans at its scheduled DevDay. Rival Anthropic is reportedly seeking a separate meeting with President Trump while also having filed IPO-related documents. Its valuation could exceed $2 trillion, according to some estimates, although a loss of around $42 billion in 2025 and plans for an additional $7.3 billion investment in computing infrastructure were also cited.

Greater investment by AI companies could increase demand for semiconductors and data centers, but a successful large-scale IPO could concentrate market funds in a particular AI company. President Trump was scheduled to meet with executives from major companies, including Anthropic, Alphabet, OpenAI, Meta, Nvidia and Palantir. Industry attention is expanding from competition over model performance to safety, control systems and securing the infrastructure needed to support them.

Samsung Electro-Mechanics said it would invest KRW 6.8 trillion to expand production capacity for FC-BGA semiconductor substrates at home and abroad. It plans to invest KRW 4.27 trillion at its Sejong facility and KRW 2.11 trillion in Vietnam. The company has received advance payments worth trillions of won from global big-tech clients, with Nvidia accounting for the largest share, according to reports.

The lead time for ABF substrates—the time from order to delivery—has lengthened from an average of 12 weeks to 52 weeks, while that for MLCCs has grown from 12 weeks to more than 30 weeks. Supply shortages were said to be more severe for substrates and MLCCs than for memory. Samsung Electro-Mechanics is operating its production capacity at near-maximum levels while shifting its product mix toward high-value-added products.

Stocks related to substrates and MLCCs also advanced. Korea Circuit, IsuPetasys, Daeduck Electronics, TLB and Simmtech rose, as did MLCC-related stocks such as Samwha Capacitor. However, Samsung Electro-Mechanics continued to face selling pressure after a sharp run-up in its share price, limiting its gains despite positive investment news. Third-quarter earnings and the impact of pricing in the second half were cited as the next factors to watch for the stock.

Meta entered the race to bring AI into everyday devices by unveiling smart glasses developed with Ray-Ban and VR glasses. It also introduced a lightweight model without a camera, aiming to reduce privacy concerns and the burden of wearing the device. A product featuring BLACKPINK's Lisa as its model emphasized the glasses' design and fashion appeal.

Wider adoption of smart glasses could boost demand for components such as camera modules, substrates and MLCCs. In South Korea, LG Innotek and other companies linked to cameras, substrates and MLCCs were cited as potential value-chain participants. With Samsung also preparing to enter the glasses market, attention is focused on which companies will be included in the supply chains for each product.

Competition among AI agents appears set to shift beyond model performance to safety and control. Nvidia said it would build an AI-agent safety platform with around 100 companies. Whether data centers and service infrastructure can keep pace with user growth was also identified as a challenge for commercialization.

The U.S. 10-year Treasury yield topped 5.25%, its highest level since 2007. The 2-year yield also rose to 4.937%, narrowing the gap between short- and long-term rates. Since market surveys frequently cited a 10-year yield of 5% to 5.25% as a level that could trigger a correction in the S&P 500, the current level could weigh on equities.

Slowing demand for Treasuries and pressure from supply were cited as factors behind the rise in short-term rates. The U.S. government's Treasury buyback also failed to reach its target volume that day, limiting its ability to stabilize yields, according to one explanation. The possibility of further Fed rate hikes has added to the pressure, with short-term yields rising in line with expectations for the policy rate.

The probability of a Fed rate hike in October was reported to have climbed from around 9% at the previous meeting to 70.3% on the day of the broadcast. Expectations of another hike by year-end also remain, and markets have begun to price in the possibility of two rate increases this year. Citi, by contrast, expects no further hikes this year, arguing that inflation has not risen as much as anticipated, leaving forecasts divided.

A further narrowing or inversion of the yield spread could heighten recession concerns. Mortgage rates have risen to around 7% to 8%, weighing on the housing market and household disposable income and adding to concerns about a slowdown in U.S. consumption. Consumer-related stocks, including McDonald's and companies in apparel, footwear and retail, underperformed, while the AI semiconductor ecosystem was relatively strong.

Renewed tensions related to Iran added uncertainty to global oil prices and U.S. Treasury yields. Near the end of the broadcast, WTI rose more than 1% to $93 a barrel. The war and concerns over oil supplies were cited as factors clouding inflation and rate expectations and making financial markets harder to forecast.

The difficulty of gauging how long the war will last and how oil prices will move also explains why institutions' rate forecasts diverge so sharply. Those expecting the war to end soon anticipate inflation and rates stabilizing, while those assigning a greater likelihood to a prolonged conflict are factoring in the risk of further rate hikes. Geopolitical shocks that are difficult to explain through conventional business cycles are adding to financial-market volatility.

Korea Premium Week will run for three weeks, with listed-company briefings and seminars scheduled to continue through October 16. Participating companies cited included Samsung Electronics, SK hynix, Doosan Enerbility, Hanwha Aerospace, Samsung Biologics and Shinhan Financial Group, as well as Dalba Global, Robotis, ST Pharm, Samyang Foods, PharmaResearch and LigaChem Biosciences. Robotis shares rose on news of its participation.

The government and financial authorities are pursuing a plan to shorten the settlement cycle from T+2 to T+1 and intend to prepare a roadmap by October 2026. The Korea Exchange said it plans to add a pre-market session by the end of 2027, in addition to its current after-hours market, which operates from 4 p.m. to 8 p.m. A proposal to classify KOSDAQ companies based on stability, growth and market assessments is under consideration.

A key question is how many concrete measures the event will include on long-awaited issues such as revitalizing KOSDAQ and improving listing and delisting rules. There was also interest in how briefings and seminars could be made accessible to individual investors. The event's purpose will be better served if it is followed by measures that provide investors with practical information and strengthen market confidence.

Investors should be mindful that if rates rise further from current levels, bonds could become more attractive than stocks. One benchmark cited was that a roughly 3-basis-point increase in the 10-year yield from its current level could make Treasuries more attractive than the S&P 500. Rather than trying to predict short-term rate movements, investors should assess whether rate pressures can persist over the long term, without overlooking current risks such as weakness in the housing market and consumption.

Korea Premium Week is expected to provide an opportunity to lay out concrete timelines and measures for market reform. Any plan to extend trading hours to 24 hours should begin by examining its purpose and whether it would genuinely improve foreign investors' access. The view was expressed that priorities should include amendments to the Commercial Act, preventing stock-price suppression, revitalizing KOSDAQ and improving delisting rules—all of which could strengthen market confidence—rather than extending trading hours.

A man in his 50s who graduated from university during the IMF crisis shared his story of balancing a jeonse loan, his children's education and care for an ailing parent, while hoping to leave a better society for the next generation. His account conveyed the burdens of everyday life that cannot easily be reduced to a divide between privileged older generations and young people. He also expressed a desire to contribute to improving society, beyond the gains made in the market.