Bond Pattern
The Financial Supervisory Service announced on June 9 that foreign investors recorded a net going-public bond investment of 3.197 trillion won (US$2.850 billion) last month, when their net bond purchase increased by 700 billion won (US$624 million) from a month ago to 4.4353 trillion won (US$3.954 billion), and redemptions at maturity added up to 1.2387 trillion won (US$1.1043 billion). Net investments reached a 27 month high last month.
[[{"fid":"11787","view_mode":"body_image_right","fields":{"format":"body_image_right","field_file_image_alt_text[und][0][value]":"","field_file_image_title_text[und][0][value]":""},"type":"media","attributes":{"height":508,"width":550,"class":"media-element file-body-image-right"},"link_text":null}]]It is expected that they concentrated on short-term bonds. In the treasury-bond futures market, their net purchase of three-year bonds has continued for four weeks in a row. Between May 18 and June 9, the amount totaled 41,122 contracts, whereas their net purchase of 10-year treasury bonds was limited to 14,073 contracts.
Long-term bonds tend to be influenced mainly by global market conditions, while short-term bonds hinge more on domestic policy decisions. This means that foreign investors are betting on an additional key interest rate cut these days.
“It seems that European investors in Switzerland, Luxembourg, and the like are continuing to buy domestic bonds based on their expectations for the capital gain to follow a benchmark rate cut,” said a securities market expert, adding, “Expectations are rising for thean interest rate cut, with the spread of MERS-CoV dragging down domestic consumption.”
The Monetary Policy Committee of the Bank of Korea is scheduled to determine the interest rate on June 11.