October Bond Issuance Totals 91 Trillion Won... Foreign Buying Rises

Foreign investors shift from net selling to net buying
Government bond yields end lower across all maturities

New bonds worth 91 trillion won were issued last month. Foreign investors’ buying of bonds increased compared with the previous month.

On November 10, the Korea Financial Investment Association announced its “October 2026 Over-the-Counter Bond Market Trends” report. Bond issuance last month totaled 91 trillion won, up 4.5 trillion won from 86.5 trillion won the previous month. Issuance of government and corporate bonds declined, but the total rose as issuance of special bonds and financial bonds increased significantly.

Individual investors’ net purchases totaled 2.7135 trillion won, down 1.3 trillion won from the previous month. By bond type, they recorded net purchases of 826.6 billion won in government bonds, 242.8 billion won in special bonds, and 241.4 billion won in corporate bonds.

By contrast, foreign investors’ net purchases of domestic bonds totaled 8.452 trillion won, up 9.6 trillion won from the previous month. In September, foreign investors had net sold 115.8 billion won in government bonds. At the end of September, foreign investors held 344.4 trillion won in domestic bonds, an increase of 7.5 trillion won from the end of the previous month.

The Korea Financial Investment Association explained, “As the CRS rate fell rapidly from the beginning of the month, the swap basis widened, strengthening foreign investors’ incentives for arbitrage. In particular, foreign investors’ buying of bond futures increased. Even after the middle of the month, the CRS rate continued to decline and the swap basis widened, raising incentives for arbitrage. Meanwhile, foreign investors continued buying bonds, particularly medium- and long-term bonds, partly due to inflows of funds related to the WGBI inclusion at the end of the month.”

Government bond yields ended last month lower across all maturities than at the end of September. At the end of October, the yield on one-year government bonds was 3.588%, down 14.5 basis points from the previous month-end; the three-year yield was 3.715%, down 29.6 basis points; and the 10-year yield was 4.008%, down 39.9 basis points. (One basis point equals 0.01 percentage point.)

However, yields were volatile throughout the month, influenced by international oil prices and concerns about Europe’s fiscal situation. The Korea Financial Investment Association said, “During the month, U.S. Treasury yields showed high volatility, particularly at the long end, due to upward pressure on service-sector prices, concerns about Europe’s fiscal situation, and the burden of large-scale corporate bond issuance. Later, as long-term U.S. yields stabilized and foreign investors continued making large-scale purchases of government bond futures, the rally in government bonds gained strength.”

It added, “At the end of the month, government bond yields declined overall as both the Bank of Korea’s Monetary Policy Board and the U.S. Federal Open Market Committee held their policy rates unchanged. Safe-haven demand persisted amid weakness in global technology stocks, and government bond yields ended October lower.”

This content was produced with the assistance of AI translation services.