South Korea's financial markets are likely to undergo further volatility as bond yields and inflation risks are rising amid hopes for an economic recovery, a vice finance minister said Tuesday.

First Vice Finance Minister Kim Yong-beom warned that if US bond rates continue to rise, asset prices may suffer a decline, after their bull run caused by ample liquidity.

"If US bond yields continue to rise, investors could turn risk-averse, which could spark a fall in asset prices and capital outflows from emerging markets," Kim said at a government meeting on macroeconomic situations.

He said the government will closely monitor financial markets while keeping close tabs on such risk factors.

Yields on 10-year Korean government bonds continued to break yearly highs amid rises in global bond rates and concerns about the country's planned massive debt sale.

The return on 10-year Treasurys came to 2.028 percent Monday, up 3.6 basis points from the previous session. The yield topped 2 percent for the first time since March 2019.

The country's key stock index fell below the 3,000-point mark on the same day on renewed concerns about inflation risks. The stock market has seen a rise in price swings since it soared above 3,200 for the first time in late January. (Yonhap)