Foreign Investors Sold Off 6.5 Trillion Won of Korean Bonds Last Month

Foreign investors sold approximately 6.5 trillion won worth of domestic bonds last month.

According to the 'International Finance and Foreign Exchange Market Trends' report released by the Bank of Korea on the 9th, foreign bond investment funds recorded a net outflow of $5.29 billion last month. Based on the end-of-month KRW-USD exchange rate (1,231.9 won), this amounts to about 6.5168 trillion won.

This is the largest net outflow since the Bank of Korea began related statistics in 2000. The Bank explained that "the net outflow scale expanded mainly due to public funds."

On the other hand, foreign investment in domestic stocks saw a net inflow of $4.95 billion (approximately 6.0979 trillion won) last month. This marked the fourth consecutive month of net inflows since October. The scale was also the largest in two years and two months since November 2020 ($5.52 billion net inflow).

The total foreign securities investment, combining stocks and bonds, recorded a net outflow of $34 million. This means that more funds left the Korean securities market than entered.

The credit default swap (CDS) premium for Korean government bonds (based on the 5-year Foreign Exchange Stabilization Fund bonds) averaged 44 basis points (1 bp = 0.01 percentage points) last month. This is 9 points lower than December last year (53).

CDS are financial derivatives that act as a kind of insurance, compensating for losses if the issuing country or company defaults. Generally, if the economic risk of the country increases, the premium also rises.