Business · Markets · 1 hr ago
Foreign buying lifts South Korean government bonds as US election looms
Foreign investors have helped lift South Korean government bonds this month by buying futures linked to them.
Yields have fallen, with the 10-year bond yield dropping to 4.074%, its lowest level in four months.
Investors may be drawn by South Korea’s relatively sound public finances as fiscal concerns rise in the US and Europe.
Some market watchers also say weaker demand for technology stocks has made bonds more attractive as a safer investment.
More foreign buying could push yields lower, though analysts say further declines may be harder without a lower outlook for South Korea’s policy rate.
The next domestic tests are the government’s bond issuance plan on October 29 and inflation data due November 3.
US long-term rates after the midterms are the key external factor, since a fall in US yields could also pull South Korean yields down.
Foreign buying of South Korean government bond futures has helped lift prices and push yields lower in October.
Foreign investors bought about 128,000 three-year bond futures and more than 47,000 10-year futures during the month through October 24.
The 10-year government bond yield ended the previous day at about 4.074%, down more than 52 basis points from its mid-September peak.
Analysts cited South Korea’s relatively sound fiscal position and weaker risk appetite as possible reasons for foreign demand.
The outlook may depend on foreign trading, domestic economic data and US long-term yields after the US midterm elections.
- Who
- Foreign investors have been buying South Korean government bond futures and bonds.
- What
- Their purchases have helped strengthen the South Korean government bond market and lower yields.
- When
- In October, through the period covered by the October 27 report.
- Where
- South Korea’s government bond market.
- Why
- Analysts cited South Korea’s relative fiscal stability and weaker risk appetite; the sources also say foreign buying may reflect demand for bonds as a safe asset.
This story does not have two clearly opposing sides.
Foreign investors bought three-year government bond futures on all but one of the first 16 trading days.
Foreign investors were net buyers of about 4.8 trillion won in over-the-counter bonds, returning to net buying on a monthly basis for the first time since July.
Yonhap reported that South Korean government bond yields had fallen, with long-term yields declining more than short-term ones.
South Korea’s November government bond issuance plan was due to be announced.
South Korea’s October consumer price data was due to be announced.
- Three-year bond futures
- About 128,000 contracts net bought in October through October 24
- 10-year bond futures
- More than 47,000 contracts net bought over the same period
- 10-year government bond yield
- About 4.074% at the previous day’s close, down more than 52 basis points from its mid-September peak
- Three-year government bond yield
- About 3.789% at the previous day’s close, down 33 basis points from its late-September peak
- Foreign over-the-counter bond buying
- About 4.8 trillion won net bought through October 23
1 source
What people are saying
As the upward momentum of semiconductor- and AI-related stocks has weakened, the role of bonds as a safe asset is growing
The economic conditions themselves have not worsened, and oil prices remain high, so it is difficult for bond strength to continue as a trend
If foreign net buying of government bond futures continues, yields could fall further
When the legislature shifted to a divided government, constraints on additional tax cuts and spending increases eased the burden of government bond supply