Overview
- South Korea began an eight-month, phased entry into FTSE Russell’s World Government Bond Index on Wednesday, a benchmark of local-currency sovereign debt tracked by an estimated $2.5–3 trillion, with full inclusion slated for November.
- Financial authorities reported 4.4 trillion won in foreign purchases of Korean treasury bonds from Monday to Wednesday, including 2.77 trillion won on Tuesday in what Korea Exchange data show was the largest daily net buy since September.
- Officials cite expected passive inflows of about $50–60 billion through November, though analysts warn the weaker won and a smaller pool of index-tracking assets could reduce Korea’s effective weight and the realized flows.
- Market strategists say index entry should help cap further rises in government bond yields rather than spark a broad rally, as higher oil prices and rate worries have recently pushed borrowing costs up.
- Because the index covers only local-currency bonds, Korea’s weight moves with exchange rates, and many overseas buyers hedge currency risk, which means support for the won may be modest even as bond demand improves.