April Government Bond Yields End Flat amid Rising Oil Prices and Inflationary Pressures

Firm Start on Hopes of WGBI Inclusion
Reversal Amid Concerns Over Stalled Middle East Negotiations

In April, government bond yields, which initially opened higher on eased Middle East risks and expectations of WGBI inclusion, ended the month flat due to rising oil prices and inflationary pressures.

According to the "April 2026 OTC Bond Market Trends" released by the Korea Financial Investment Association on May 12, the yield on the 3-year government bond at the end of April was 3.595%, up 4.3 basis points from the end of the previous month. The 2-year government bond yield fell by 0.6 basis points to 3.475%, while the 10-year yield rose by 4.4 basis points to 3.923%. The 20-year yield increased by 0.3 basis points to 3.876%, and the 30-year yield climbed by 1.5 basis points to 3.790%, with long-term yields also remaining largely unchanged.

The Korea Financial Investment Association explained, "At the start of the month, progress in ceasefire talks between the US and Iran, increased net buying of 3-year and 10-year government bond futures by foreign investors, and expectations of foreign capital inflows related to WGBI inclusion led to strong performance across all maturities. However, in the second half of the month, as negotiations between the US and Iran stalled and concerns grew over a prolonged blockade of the Strait of Hormuz, oil prices rose and inflation issues resurfaced, causing yields to return to previous levels by the end of the month."

Bond trading volume decreased compared to the previous month. The OTC bond trading volume in April was KRW 498.6 trillion, down KRW 69.7 trillion from the previous month. The average daily trading volume was KRW 22.6 trillion, a decrease of about KRW 4.4 trillion from the previous month.

In April, net purchases by individuals totaled KRW 3.2813 trillion, a decrease of KRW 629.4 billion from the previous month. This included KRW 940.1 billion in government bonds, KRW 665.7 billion in special bonds, and KRW 552.0 billion in corporate bonds.

Net purchases of government bonds by foreign investors decreased by KRW 100 billion compared to the previous month, remaining at a similar level. In April, foreign investors were net buyers of KRW 8.4 trillion in government bonds, but net sellers of KRW 200 billion in monetary stabilization bonds and KRW 1 trillion in other bonds, resulting in a total net purchase of KRW 7.3 trillion.

Bond issuance increased by KRW 700 billion overall, driven by higher issuance of special bonds and financial bonds. Net issuance of government bonds, financial bonds, and special bonds was KRW 2.1 trillion, and the total outstanding balance reached KRW 3,092.4 trillion.

Corporate bond issuance was KRW 10.6 trillion, down KRW 3.1 trillion from the previous month. Credit spreads widened slightly for both AA- and BBB- rated bonds. Due to the continued high interest rate environment and the contraction of the corporate bond issuance market, the amount of corporate bond demand forecasts stood at KRW 3.395 trillion (50 cases), down KRW 2.445 trillion from the same period last year (KRW 5.84 trillion).