Shorter-dated government bonds or higher-yielding corporate bonds are gaining grounds in the Korean debt market as investors opt for faster returns amid flat-lining in government bonds due to lessening possibility of a rate hike in the near future.

According to Seoul-based financial data provider FnGuide on Tuesday, net outflow from government and public bonds over the last month reached 68.3 billion won ($60.4 million), whereas debts dated six months or shorter and corporate bond funds drew 35.9 billion won and 80.8 billion won, respectively.

Government bonds stayed highly popular, attracting 569.7 billion won, throughout last year as they posed as safer alternative against volatile stock market. But yields of longer government bonds have been flattening as fragility in the economy suggests the central bank won’t likely make a rate move most of the year.

The traditional government bonds have lost appeal as the gap between the yield of three-year treasury bond and overnight call rate has narrowed to 5 basis points, said Lee Jeong-ho, director at Tong Yang Asset Management Corp.

Among bond-focused funds, those with greater weight of corporate bonds drew the most funds over the past month.

By Kim Je-lim and Lee Ha-yeon

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