Bond Market, Will the Donghak Ant Movement Recur... Quadruple Surge This Year

[Asia Economy Reporter Ji Yeon-jin] Will the Donghak Ant Movement be reenacted in the bond market amid the cold wave? As bond prices have fallen to financial crisis levels, the number of individual investors expanding bond investments has surged, raising such expectations.

According to the Korea Financial Investment Association on the 9th, individual investors have net purchased bonds worth 17.2572 trillion won so far this year until the previous day. This is more than four times the net purchase amount of 4.3298 trillion won during the same period last year.

This year's rise in bond yields has surged beyond the level of 1994, known as the 'bond massacre,' and the higher interest rates have emerged as an investment attraction, leading to an inflow of funds from individual investors. Additionally, the sharp decline in stock prices since the beginning of this year has drawn attention to bonds as a relatively safe asset, attracting individual investors to the bond market.

According to SK Securities, the bond holdings of individual investors amount to 22.8621 trillion won, with corporate bonds (10.9544 trillion won) accounting for the largest share at 47.9%. This is followed by asset-backed bonds (4.8032 trillion won), government bonds (3.9175 trillion won), bank bonds (2.3473 trillion won), and public corporation bonds (839.7 billion won). By maturity, bonds with less than one year to maturity are the largest at 6.5314 trillion won, and those with less than three years amount to 6.5205 trillion won, meaning products within three years account for more than half. The focus is on short-term bonds with high interest rates.

The funds from these individual investors are considered a strong supportive force in the bond market, which has entered a historically bearish phase this year. Individual investors led the so-called 'Donghak Ant Movement' by jumping into stock investments after the domestic stock market plunged sharply in March 2020 when the COVID-19 pandemic began, driving the stock market's upward trend. There is hope that if the investment fever among individuals spreads to the bond market, it could help thaw the frozen market. Yoon Won-tae, a researcher at SK Securities, said, "While institutional investors' investments in the bond market have recently decreased, the proportion of individual investors has increased," adding, "Since individual investors mostly adopt a buy-and-hold investment strategy, they are expected to act as a factor that reduces market volatility in the credit bond market."