Long-term Investment
According to industry sources, the 10-year U.S. treasury bond yield closed at 2.286 percent a year on Sept. 15. On the same day, the 10-year Korean treasury bond yield was 2.252 percent. The reversal can be attributed to the uncertainties related to an interest rate hike by the Fed.
Such a reversal was also witnessed in June this year, when the Bank of Korea decided to continue to lower the benchmark rate and the Fed was said to be preparing its exit strategy. Under the circumstances, concerns are mounting over foreign investors selling won-denominated bonds to trigger a massive capital outflow.
Nevertheless, experts point out that foreign investors are unlikely to dispose of their won-denominated bonds in quantity for the time being, given that their investment in Korea revolves around short-term bonds. In fact, the 30-year U.S. treasury bond yield has remained over the 30-year Korean treasury bond yield since March. Specifically, the former and the latter were 3.07 and 2.50 percent as of Sept. 15, respectively.
“The reversal in bond yield that has been shown since March has had no significant impact on the market,” said NH Investment and Securities bond manager Park Jong-yeon, adding, “Likewise, the more recent reversal is likely to result in no substantial capital outflow, with most of the bonds they have in Korea are three-year ones.”