Foreign investors turn net sellers of S. Korean bonds in August

Business To Business, Seoul, 13 September 2026:  Foreign investors turned net sellers of South Korean bonds in August for the first time in about 3 1/2 years, industry data showed on Sunday, as the yield advantage from currency-hedged investments declined.
 
Foreign investors sold a net 839.7 billion won (US$624.8 million) worth of Korean bonds last month, marking their first monthly net selling since January 2023, according to data from investment banks and debt market sources.
 
They remained net buyers of 63.26 trillion won in the year through Sept. 11, but the amount was down 35.2 percent from the same period a year earlier, reports Yonhap news agency.
 
Their Korean bond holdings also fell sharply, dropping by about 12.9 trillion won from a record 356.6 trillion won on July 24 to 343.6 trillion won on Sept. 2. It marked the largest decline over a comparable 27-trading-day period in the past five years.
 
The slowdown largely reflects the erosion of arbitrage opportunities, as Korean bonds have lost their yield advantage over U.S. assets after currency hedging.
 
The arbitrage spread fell from 68.3 basis points at the end of last year to minus 30 basis points as of Sept. 10, making currency-hedged investments in short-term Korean bonds less attractive than comparable U.S. dollar assets.
 
Still, passive inflows tied to South Korea's phased inclusion in the World Government Bond Index (WGBI) have helped cushion the selling pressure, with market watchers saying foreign net selling would have been greater without the WGBI-related inflows.
 
Meanwhile, Seoul shares fell sharply last Friday as surging oil prices heightened inflation concerns, with investors awaiting key U.S. inflation data for clues about the Federal Reserve's future interest rate policy.
 
The Korean won fell against the U.S. dollar. After opening 3.29 percent lower, the benchmark Korea Composite Stock Price Index (KOSPI) narrowed its losses to close 124.01 points, or 1.76 percent, down at 6,909.91.
 
Trade volume was moderate at 265.92 million shares worth 19.39 trillion won (US$14.4 billion), with losers outnumbering gainers 473 to 368.