Key Summary
- Foreign investors bought a net 8.452 trillion won in Korea’s over-the-counter bond market in October, reversing a September net selling position.
- Foreign demand was concentrated in government bonds, while treasury bond futures buying and a preference for safe assets helped push yields lower across short-, medium-, and long-term maturities.
- The 3-year, 10-year, and 30-year Korean Treasury yields all declined from the previous month’s end.
- Overall bond issuance rose month on month, while corporate bond issuance fell.
Main Story
Foreign investors shifted back to net buying in Korea’s over-the-counter bond market in October, purchasing a net 8.452 trillion won in bonds, according to data released on Nov. 10 by the Korea Financial Investment Association.
The latest figure marked a sharp turnaround from September, when foreigners were net sellers by 1.158 trillion won. Government bonds accounted for 7.447 trillion won of the purchases, while monetary stabilization bonds saw 137 billion won in net buying.
According to the association, the foreign inflow was supported by arbitrage incentives linked to falling currency swap rates and by fund inflows associated with inclusion in the World Government Bond Index. Buying continued late in the month, especially in medium- to long-dated bonds.
Korean Treasury yields moved lower across the curve. The 3-year yield ended the month at 3.715%, down 29.6 basis points from the end of the previous month. The 10-year yield fell 39.9 basis points to 4.008%, and the 30-year yield dropped 40.2 basis points to 4.124%.
Early in the month, lower international oil prices and a steadier won helped ease upward pressure on yields. Later, continued foreign buying of treasury bond futures supported bond prices. Toward the end of the month, the Bank of Korea and the U.S. Federal Reserve both left policy rates unchanged, while weakness in global technology stocks helped reinforce demand for safe assets, pushing yields down further.
Buying trends diverged between foreigners and individuals. While foreign investors increased their net purchases by 9.61 trillion won from the previous month, individual investors reduced their net bond buying by 32.5%. Individual net purchases totaled 2.7135 trillion won, down 1.309 trillion won month on month.
By category, individuals bought 826.6 billion won of government bonds and 241.4 billion won of corporate bonds on a net basis, both lower than the previous month, while net buying of local government bonds rose to 190.4 billion won from 133.7 billion won.
Total bond issuance reached 91 trillion won in October, up 4.5 trillion won from the previous month. The increase was driven by higher issuance of financial bonds and special-purpose bonds, which rose by 5.5 trillion won and 3.4 trillion won, respectively. Corporate bond issuance, however, fell to 7.4 trillion won, down 3.4 trillion won from the previous month.
Corporate bond demand surveys covered 29 deals worth 2.055 trillion won. Orders totaled 11.45 trillion won, for an average subscription rate of 557.4%, down 20.6 percentage points from a year earlier. Subscription rates were 623.2% for AA-rated and above issues and 390.2% for A-rated issues, with no unsold bonds reported.
Over-the-counter bond trading volume came to 434.6 trillion won, down 14.1 trillion won from the previous month. Average daily trading volume was 21.7 trillion won, a decline of 700 billion won.
Background
The article does not provide additional background beyond the monthly market data and the factors cited for yield movements and foreign buying.
Items Requiring Further Verification
- The article attributes foreign buying to lower currency swap rates, WGBI-related inflows, and safe-haven demand, but these are presented as explanatory factors rather than independently demonstrated causes.
- The statement that late-month buying was concentrated in medium- to long-term bonds is reported without underlying transaction-level detail.
- The connection between the Bank of Korea and Federal Reserve holding rates steady and the decline in Korean Treasury yields is described as a market influence, not a directly measured causal relationship.
- The reported participation rates, issuance figures, and trading volumes are based on the association’s monthly data release and would benefit from independent confirmation where material.