Foreign investors' bond buying spree continues

Foreign investors have net purchased more bonds from January to July than in all of 2020, amid signs that Korean bonds are largely regarded as an attractive investment destination, data showed Tuesday.

Foreign investors have net bought 83 trillion won ($72.2 billion) worth of Korean bonds -- including sovereign bonds, monetary stabilization bonds and bank debentures -- this year until July. The figure is higher than that of 2020, at 73 trillion won, according to data from the Korea Financial Investment Association.

Solely in July, foreign investors net purchased bonds worth 13 trillion won. The foreign net purchase of bonds here set a monthly record in June, at 19.2 trillion won.

The buying spree brought the cumulative bond holdings of foreign investors to the record-high 195.3 trillion won as of end-July, up by 6.4 trillion won over the past month, maintaining the streak for seven months.

The Kofia said in a statement that foreigners find Korean bonds attractive as bonds’ coupon rates are relatively higher given Korea‘s sovereign credit rating, while investors continue to capitalize on arbitrage oppotunities through Korean bond trades.

Moody’s Investors Service has kept South Korea‘s sovereign credit rating at “Aa2” since December 2015. S&P also maintained an “AA” credit rating with stable outlook, and Fitch sustained “AA-” rating for the past few years.

In the meantime, Korea’s bond yield has been on the rise in 2021.

Korea‘s three-year sovereign bond yield came to 1.432 percent Tuesday, from 0.976 percent as of end-2020. The 10-year bond yield stood at 1.916 percent, up from 1.713 percent at the end of 2020.

By Son Ji-hyoung (consnow@heraldcorp.com)