Bond Retail Investors Bought 20% More This Year... Special Bonds Increased by 2 Trillion Won

Special Bonds 821.8 Billion → 2.8794 Trillion
Highest Net Purchase of Government Bonds
Highest Growth Rate in Net Purchase of Special Bonds
Better Interest Rates and Higher Credit Ratings than Government Bonds Influence

This year, individual investors' bond purchasing momentum remains strong. The net bond purchases by individuals increased by 16.5% compared to last year. This is interpreted as a rise in bond investments, which offer stable interest and potential capital gains, amid increased volatility in the stock market. Notably, most of the increase in net bond purchases came from special bonds. Since these bonds have high credit ratings and offer higher yields than government bonds, they are believed to attract significant investment demand.

According to the Korea Financial Investment Association on the 21st, the net bond purchases by individuals from January 1 to August 19 this year amounted to KRW 28.1924 trillion, up 16.5% from KRW 24.2 trillion during the same period last year.

Breaking it down, government bonds accounted for KRW 8.7483 trillion, corporate bonds KRW 6.4899 trillion, special bonds KRW 2.8704 trillion, and bank bonds KRW 2.573 trillion. Last year, the figures were KRW 8.384 trillion for government bonds, KRW 6.3479 trillion for corporate bonds, KRW 2.6824 trillion for bank bonds, and KRW 821.8 billion for special bonds. Compared to last year, net purchases of special bonds surged by about KRW 2 trillion.

Special bonds are bonds issued by institutions established by law, such as Korea Electric Power Corporation (KEPCO), Land Development Corporation, and Housing Corporation. They generally have higher credit ratings than private companies and offer higher interest rates, making them popular among investors.

A senior executive at asset management firm A explained, "In a situation where stock market volatility is high, bond yields are still relatively favorable compared to before, making bond investments popular among individuals. Especially, there is strong demand for special bonds with top credit ratings and good interest rate conditions, such as those issued by KEPCO." The executive added, "There is also significant investment in corporate bonds of companies like Korean Air, which have somewhat lower credit ratings but operate in national infrastructure industries and are unlikely to fail."

The biggest factor behind the active bond investment is the expectation of a US interest rate cut. Since early this year, there have been market expectations of a rate cut by the US Federal Reserve (Fed) within the year. Recently, the outlook that the Federal Open Market Committee (FOMC) will cut the benchmark rate in September has become dominant. The Chicago Mercantile Exchange (CME) FedWatch announced last month that 50.1% of investors expected the Fed to cut the benchmark rate by 0.50 percentage points in September.

Kang Seung-won, head of bond strategy at NH Investment & Securities Research Center, said, "With the dominant expectation of a rate cut within the year in the first half, there was a lot of bond investment to benefit from the rate cut (capital gains). Although the returns of buyers in January and April may differ, individuals who increased their bond holdings in the first half made a reasonable choice."

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