ETFs Shifting from Tech Stocks to Government Bonds Yield 4.76%
The yield on the 10-year U.S. Treasury note fell 0.19 percentage points from the previous trading day to 4.953% on Monday (local time), dropping below 5% for the first time since Oct. 23. The yield on the two-year Treasury fell 18.8 basis points to 4.635%. As a plunge in tech stocks drove increased demand for U.S. Treasuries as a safe haven, South Korean investors' net purchases of U.S. bonds this month have already exceeded last month's total. As of Oct. 22, their net purchases of U.S. bonds stood at about $1.371 billion, surpassing last month's total of $1.363 billion.
With bond yields remaining elevated, maturity-matching corporate bond exchange-traded funds (ETFs) that seek interest income through maturity have emerged as an investment alternative. According to Mirae Asset Global Investments, the yield to maturity (YTM) of the TIGER 28-04 Corporate Bond (A+ or Higher) Active ETF — the expected annual return if held to maturity — stood at 4.76% per annum as of Oct. 22. The ETF invests in domestic corporate and financial bonds maturing in April 2028 and is structured to be liquidated after recovering principal and interest at maturity. It is the only maturity-matching corporate bond ETF listed in Korea to broaden its investment universe to A+ rated bonds, with roughly 70% of its assets allocated to bonds rated AA- or higher.
Institutional inflows are also supporting demand in the corporate bond market. SK hynix has been confirmed to have deployed 900 billion won of the 3 trillion won in bond investment funds it entrusted to six asset managers.
The copper market, which had been riding expectations of AI-driven demand, is moving in the opposite direction. TIGER Physical Copper and KODEX Copper Futures (H) closed at 15,535 won and 9,755 won respectively on Oct. 23, down 5.1% and 4.9% from a month earlier. LME copper spot prices fell to $14,215 per ton on Oct. 22, down 3.93% from a month earlier ($14,797). The International Copper Study Group (ICSG) forecast that the global refined copper supply surplus will grow roughly 3.5-fold, from 104,000 tons this year to 368,000 tons next year. Ok Ji-hoe, a researcher at Samsung Futures, projected an average copper price of $14,000 per ton next year.
