1 week ago
Foreign Investors Sell South Korean Bonds as Yield Advantage Fades
Foreign investors bought fewer South Korean bonds in August than they sold.
They sold about 839.7 billion won worth of bonds.
This was the first monthly net sale since January 2023.
Their total bond purchases for the year were still larger than their sales.
However, those purchases were lower than during the same period last year.
Investors earned less of an advantage from buying Korean bonds after protecting themselves from currency changes.
Money flowing into South Korea because of its planned bond-index inclusion helped reduce the selling.
South Korean stocks also fell as higher oil prices raised concerns about inflation.
Foreign investors sold a net 839.7 billion won ($624.8 million) of South Korean bonds in August.
The selling was their first monthly net withdrawal since January 2023, according to market data.
Foreign investors remained net buyers of 63.26 trillion won through September 11, but that was down 35.2% year over year.
Their Korean bond holdings fell from a record 356.6 trillion won on July 24 to 343.6 trillion won on September 2.
The decline was linked to weaker currency-hedged returns, although World Government Bond Index inflows helped limit selling pressure.
- Who
- Foreign investors, investment banks, and South Korean debt-market participants.
- What
- Foreign investors became net sellers of South Korean bonds in August, selling 839.7 billion won.
- Where
- South Korea’s bond and financial markets.
- When
- In August; related holdings data covered July 24 to September 2, and annual flows were measured through September 11.
- Why
- Currency-hedged Korean bonds lost their yield advantage over comparable U.S. dollar assets; World Government Bond Index inflows partly offset the selling.
Key facts
- August net sales
- 839.7 billion won ($624.8 million)
- Previous net-selling month
- January 2023
- Net purchases through September 11
- 63.26 trillion won
- Year-over-year change
- Down 35.2%
- Bond holdings decline
- From 356.6 trillion won on July 24 to 343.6 trillion won on September 2
- Arbitrage spread
- Declined from 68.3 basis points at the end of last year to minus 30 basis points on September 10
- KOSPI close
- 6,909.91, down 124.01 points, or 1.76%, on Friday
Sources
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