Bonds dated six months or shorter have been gaining huge popularity in Korea amid rising uncertainties in the Korean economy and elsewhere.

According to Seoul-based financial data provider FnGuide on Friday, net inflow to funds investing in debt lasting six month or shorter reached 2.04 trillion won ($1.69 billion) so far this year, more than doubling 895 billion won into funds devoted to longer-dated government and public bonds. Funds on corporate bonds drew 1.49 trillion won.

Stock funds saw a net outflow of 207.3 billion won due to bearish sentiment in the stock market.

Demand for short-duration bond funds that allow investors to withdraw money without having to pay penalties usually soars during times of uncertainties. They offer some returns compared with bank savings accounts or money market funds (MMF) that hardly pay any yield and yet safe despite short duration.

The average yield of the debts dated six months or shorter this year stands at 1.43 percent, hovering above the average yield of 1.06 percent offered by MMFs.

Transactions of shorter-dated bond-focused exchange-traded funds (ETFs) also have been soaring on handsome returns. Among the top 10 bond ETFs by trading value, five were short-dated bond tracking funds, with KBSTAR Short-Term MSB ETF traded the most, Enhanced Cash ETF the second-most as of Friday.

By Park Eui-myung and Lee Ha-yeon

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]