Foreigners Reduced Treasury Bonds and Increased Bank Bonds This Year

[Asia Economy Reporter Hwang Junho] This year, foreign investors have diversified their investment targets in Korean won-denominated bonds.

According to KB Securities and financial information firms on the 23rd, the balance of Korean won bonds held by foreign investors increased by 14.464 trillion won as of the 20th compared to the beginning of the year.

However, among the increased balance this year, the proportion of government bonds and Monetary Stabilization Bonds, which foreign investors have mainly invested in the domestic bond market, accounted for 57% (8.26 trillion won). This is a significant decrease from 82% during the same period last year.

On the other hand, the share of bank bonds in the increase in balance this year was 33% (4.741 trillion won), which is much higher than last year's 17%. The investment proportion in corporate bonds and asset-backed securities, which were largely ignored last year, also reached about 3% (458 billion won) this year.

In the securities industry, it is believed that foreign investors mainly purchased special bank bonds issued by policy banks such as the Industrial Bank of Korea, Korea Development Bank, and Export-Import Bank of Korea among bank bonds this year. It is also analyzed that as interest rates rose, foreign investors flocked to these bonds because they have credit ratings comparable to government-issued treasury bonds and Bank of Korea-issued Monetary Stabilization Bonds.

Im Jaegyun, a researcher at KB Securities, said, "Banks have credit ratings almost identical to the government and there is a belief that the government will guarantee them even in the worst-case scenario," adding, "From a yield perspective, bank bonds are better than treasury bonds, and since the risk is not significantly different, investors have moved to buy them."

Kim Sanghoon, a researcher at Hana Securities, also explained, "In the case of bank bonds, they are very safe in terms of credit rating, and with interest rates rising, foreign investors seem to have demand thinking, 'Will we see such interest rates again later?'"

This content was produced with the assistance of AI translation services.