Foreign Net Buying of Korean Treasury Bonds Surpasses 40 Trillion Won Since Inclusion in WGBI

The process of including Korean Treasury bonds in the World Government Bond Index (WGBI) has passed the halfway point. Since Korean government bonds were included in major global bond indices, foreign investors have flocked in, pushing net purchases beyond 40 trillion won. From the end of March to the 9th, foreigners made net purchases of 41.2 trillion won worth of Treasury bonds. An average of about 10 trillion won in foreign bond funds have flowed in monthly.

As index-tracking funds continued to flow, it was confirmed in portfolios that Japan's Government Pension Investment Fund (GPIF) purchased approximately 1.96 trillion won worth of Korean Treasuries as of the end of March. Hwang Soon-kwan, head of the Ministry of Economy and Finance's National Treasury Bureau, stated that the holdings of Korean Treasury bonds by Japanese investors have increased more than tenfold.

The phased inclusion procedure, which takes place monthly, will continue until November, when Korean government bonds complete their final inclusion in the WGBI benchmark at 1.75%. Since the WGBI inclusion began, the yield on 3-year Treasuries has risen by about 20bp, and the 10-year yield by 34bp. Samsung Securities researchers revealed that they estimate approximately 16 trillion won in net inflows solely from GPIF funds upon the completion of WGBI inclusion in November.