Domestic Bond Yields Drop Sharply in July
The Korea Financial Investment Association announced on Aug. 10 that foreigners’ net government, monetary stabilization and bank bond purchases added up to 7.7 trillion won, 4.7 trillion won and 0.6 trillion won last month, respectively. Their bond holdings increased 6.4 trillion won to reach an all-time high of 195.3 trillion won.
Last month, the domestic bond yields fell a lot, led by mid- to long-term bonds, with investors’ preference for safe assets increasing. In addition, the Bank of Korea has signaled an early key rate rise since the middle of last month, the South Korean government conducted no deficit bond issuance in spite of a large supplementary budget, and U.S. bond yields continued to fall.
Last month, the total bond issuance fell 21.8 trillion won to 68.7 trillion won with the issuance of government, corporate and financial bonds falling. The total outstanding bonds reached 2,419.1 trillion won as the net issuance of government, corporate and special bonds increased by 18.8 trillion won.
Corporate bonds fell 6.7 trillion won to 8.6 trillion won last month. The issuance of private placement bonds considerably decreased, although the issuance demand on the corporate side increased. The corporate bond credit spread fell as bond-related funds flowed back in. The issuance of ESG bonds fell 2,118 billion won to 7,192 billion won with the corporate demand falling.
The bond demand forecasts totaled 41 cases and 2.7 trillion won. The total participation in the forecasting was 10.001 trillion won and the participation divided by the forecasting reached 370.4 percent, up 90.7 percentage points from a year ago.