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Foreign Investors Become Net Sellers of South Korean Bonds in August

morning · · thread: South Korea's Foreign Reserves See Record Monthly Increase in August

2 sources · South Korea · 1 of them is linked to a state

Who reported this

  • Yonhap South Korea · Centre · State-affiliated · Cooperative; statutory national agency with state subsidy
  • The Korea Herald South Korea · Centre-right · Herald Corporation (Yeongpoong Group)

What the colours mean

  • Left
  • Centre-left
  • Centre
  • Centre-right
  • Right
  • A hatched block means the outlet is affiliated with, or controlled by, a state.

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Every source for this story reports from South Korea.

Foreign investors turned into net sellers of South Korean bonds in August for the first time in approximately 3.5 years. According to data from investment banks and debt market sources, foreign investors sold a net 839.7 billion won, or 624.8 million US dollars, worth of bonds last month. This marks the first monthly net selling since January 2023.

While foreign investors remained net buyers of 63.26 trillion won in the year through September 11, this amount represents a 35.2 percent decrease compared to the same period last year. Total Korean bond holdings dropped by about 12.9 trillion won, falling from a record 356.6 trillion won on July 24 to 343.6 trillion won on September 2. This is the largest decline over a comparable 27 trading day period in the past five years.

The decline is attributed to the erosion of arbitrage opportunities. Korean bonds lost their yield advantage over US assets after currency hedging, with the arbitrage spread falling from 68.3 basis points at the end of last year to minus 30 basis points as of September 10. This shift made currency hedged investments in short term Korean bonds less attractive than comparable US dollar assets.

Market watchers noted that selling pressure was partially cushioned by passive inflows related to South Korea's phased inclusion in the World Government Bond Index. Without these WGBI related inflows, foreign net selling would likely have been greater.

How each side framed it

Centre
The outlet presented the data as a straightforward financial report focusing on yield advantages and market indices.
Centre-right
The outlet provided a factual summary of the event without adding additional framing or commentary.

Sources

100% of the statements in this article were traced back to the source articles listed above.