"Now Is the Time to Buy Corporate Bonds, Not Stocks" Money Flows into the Bond Market

'Money Move' Institutional Big Players Buy Bonds Again

[Asia Economy Reporter Park So-yeon] As domestic and international interest rates rise rapidly, major domestic pension funds and mutual aid associations are shifting their operating funds to bonds that can relatively stably earn interest. The global stock market, shocked by the steeper-than-expected interest rate hikes, has undergone a significant correction, driving investors toward the safe asset of the bond market.

According to the investment banking (IB) industry on the 6th, Noran Usan, a mutual aid association for small business owners under the Korea Federation of Small and Medium Business, has invested in AA-rated high-quality bonds for two consecutive months, deploying a total of 500 billion KRW. Most of the bonds invested in have maturities of 3 to 5 years. Lee Do-yoon, Chief Investment Officer (CIO) of Noran Usan Asset Management Headquarters, said, "As bond interest rates have risen sharply, the attractiveness of bond investments as safe assets has increased," adding, "There is increased instability in stocks and alternative investments, making bold execution difficult."

Until the second half of last year, the management policy was to increase the proportion of stocks and alternative investments rather than bonds, but this reversed this year. Other mutual aid associations have similar views. Lee Sang-hee, Director of Financial Investment at the Military Mutual Aid Association, said, "Now is the time to buy long-duration (long maturity) high-quality bonds unconditionally," diagnosing, "If you buy now, you will definitely make a profit."

Typically, when market interest rates rise, the prices of held bonds fall, resulting in valuation losses. However, if bond prices have already dropped significantly and are purchased at low prices, capital gains can be expected. Newly issued bonds have high coupon rates, allowing for stable interest income. If held to maturity while receiving interim interest payments (carry), there is no concern about losses. Han Jong-seok, Director of Financial Investment at the Police Mutual Aid Association, also confirmed, "The current direction is right for bond investment."

A pension fund bond investment officer said, "In the past month, institutional investment funds have been flowing into bonds in both the issuance and secondary markets," adding, "Competition to secure AA-rated high-quality corporate bonds has become quite fierce."