[2025 Audit] Bank of Korea: "Up to 90 Trillion Won in Investment Funds Could Flow into Korea with WGBI Inclusion"

About 2.05% of Tracking Funds
"Inflows of Investment Funds Could Lower Government Bond Yields"
Assemblyman Cha Kyugeun: "Expansionary Fiscal Burden Will Also Decrease"

There are projections that up to 90 trillion won in global investment funds could flow into South Korea if the country is included in the World Government Bond Index (WGBI). It has also been pointed out that this could act as a factor in lowering government bond yields.

Bank of Korea building exterior

According to data received by Assemblyman Cha Kyugeun of the Rebuilding Korea Party, a member of the National Assembly's Planning and Finance Committee, from the Bank of Korea on October 20, the central bank estimates that approximately 2.05% (as of March this year) of the WGBI-tracking funds (250 billion to 300 billion dollars) would flow into the domestic market if South Korea is included in the index. This amounts to about 70 trillion to 90 trillion won.

The Bank of Korea expects that the inflow of investment funds could serve as a factor in lowering government bond yields. The central bank stated, "The market expects that a high proportion of WGBI-tracking funds come from pension funds and other long-term investors, which will also help reduce the volatility of government bond yields."

According to the Ministry of Economy and Finance’s government bond issuance plan, the scheduled issuance of government bonds this year is 231.1 trillion won, a 46% increase from last year’s 157.7 trillion won. However, as of August, the yield was 2.611%, lower than last year’s 3.22%. The Bank of Korea’s analysis suggests that there is room for yields to decline further if South Korea is included in the WGBI.

Assemblyman Cha stated, "Although the scale of government bond issuance is increasing, if yields stabilize due to WGBI inclusion, it could partially offset the rise in fiscal funding costs. The decline in government bond yields should not be seen as a mere financial market change, but as a structural shift that expands the government’s fiscal capacity for expansionary policies."

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