À̹ÌÁö È®´ë [Photo by MK DB]
South Korea¡¯s corporate bond funds attracted 1 trillion won ($774.4 million) this year amid growing popularity of corporate bonds among investors looking for safe assets.
According to Korean stock tracker FnGuide Inc. on Thursday, corporate bond funds has increased by 1.47 trillion won this year, more than three times more than the 399.5 billion won government bond funds.
In particular, corporate bond funds increased by 150 billion won in the past week following the collapse of Silicon Valley Bank and the Credit Suisse crisis, but government bond funds decreased by 24.1 billion won and general bond funds by 251.2 billion won, respectively. Investors seem to have opted for corporate bonds over government bonds and ultra-short-term bonds as safe assets in the current volatile markets.
Analysts saw this development as attributable to the difference in interest rates between corporate and government bonds. South Korea¡¯s 10-year government bond yield has fallen to the 3 percent level from 4.5 percent at the end of last year. U.S. Treasury yields were also in the 4 percent range earlier this month, but are now in the mid-3 percent range. Corporate bond yields, on the other hand, are in the 4 percent to 6 percent range. At a time when interest rates on fixed-term deposits at banks are falling to the 3 percent to 4 percent, investors looking for high returns have chosen to invest in corporate bond.
As a result, the amount of exchange-traded funds (ETFs) that invest in corporate bonds is rapidly increasing. Most of the net assets of corporate bond-related ETFs exceeded 100 billion won. ACE 23-12 Corporate Bonds Active ETF amounted to 150 billion won, KBSTAR 23-11 Corporate Bonds Active ETF 540 billion won and TIGER 24-10 Term Corporate Bonds Active ETF 460 billion won.
U.S. Federal Reserve Chairman Jerome Powell said after the Fed raised its key interest rate by a quarter percentage point Wednesday that there would be no more interest rate cut this year. The financial investment industry predicts that his remarks will have a limited impact on the corporate bond market.
If the policy rate is maintained at a high level, government bond yields could fall further as the economy slows. In this case, investor demand for corporate bonds could increase as corporate bond yields are not significantly affected. However, if interest rates remain high and an economic downturn leads to credit problems, such as corporate bankruptcies, corporate bonds are unlikely to be considered safe either. An asset management company official expected that the popularity of high-quality corporate bonds will continue for the time being.
By Won Ho-sup and Yoon Yeon-hae
[¨Ï Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]