Foreign Bond Sales Hit 839.7 Billion Won
Foreign investors sold 839.7 billion Korean won in domestic bonds last month, ending a 43-month buying streak. Total holdings dropped 12.9 trillion won in 27 trading days, marking the steepest five-year decline.
Net foreign sales of 839.7 billion won ended a 43-month buying streak. This marks the first monthly net outflow since January 2023. The shift follows a net purchase of 1.81 trillion won in July.
Foreign holdings fell 12.93 trillion won in 27 trading days. This is the largest drop over that period in five years. Holdings peaked at 356.56 trillion won on July 24 before sliding to 343.63 trillion won.
Carry Trade Incentive Turns Negative
The carry trade incentive dropped to -30.0 basis points. It was 68.3 basis points at the end of last year. This reversal eliminates the profit edge for hedged won investments.
The three-month won-dollar swap rate narrowed from -1.48% to -0.43%. This reduction diminishes hedging benefits for dollar-to-won conversions. Short-term Korean bond yields no longer beat dollar rollover costs.
External Pressures Affect Domestic Yields
U.S.-Iran tensions pushed oil prices above $100 per barrel. U.S. Treasury yields rose sharply in response. Domestic bond rates are now fluctuating under dual external pressure.
Foreign net purchases this year total 63.26 trillion won. This is 35.2% lower than the same period last year. Momentum has slowed significantly despite continued positive net flows.
Market Outlook Remains Cautious
Analysts cite deteriorating foreign liquidity as a key risk factor. Oil price volatility and U.S. rate hikes compound the challenge. The domestic bond market faces reduced foreign demand and higher global rates.
GN auto markets/bonds: bond trading data confirms the shift in sentiment. The absence of carry trade profits removes a core driver for foreign capital. Future inflows depend on renewed yield advantages.
