Foreign Investors Pour 41.2 Trillion Won into Korean Bonds Since WGBI Inclusion Began in March

According to Yonhapnews, foreign investors have net purchased 41.2 trillion won of Korean government bonds since late March as South Korea's debt enters the World Government Bond Index, with monthly inflows averaging approximately 10 trillion won.

Despite smooth fund flows driven primarily by Japanese passive funds, yields on Korean 3-year notes rose roughly 20 basis points and 10-year yields jumped 34 basis points since the WGBI inclusion started in April, contrary to initial expectations for rate declines. Market participants attributed the weakness to Middle East tensions and concerns over potential rate hikes outweighing foreign demand.