Omnibus account balances for foreign buyers of Korean bonds surpass 1 trillion won

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Omnibus account balances for foreign buyers of Korean bonds surpass 1 trillion won

Published: 17 Oct. 2024, 16:50

SHIN HA-NEE
shin.hanee@joongang.co.kr

Minister of Economy and Finance Choi Sang-mok, center, poses for a photo with senior officials during a ceremony celebrating the launch of the omnibus account system in western Seoul on June 28. [KOREA SECURITIES DEPOSITORY]

The balances of omnibus accounts for Korean government bonds have surpassed 1 trillion won ($731 million), according to the Korea Securities Depository (KSD) Thursday, three months after the International Central Securities Depositories (ICSD)-linked accounts were first introduced to facilitate treasury bond investments for foreigners.

The 1 trillion won milestone was reached on Oct. 8, just ahead of the announcement of Korea’s inclusion in the World Government Bond Index (WGBI) operated by FTSE Russell. The announcement was made on Oct. 9.

Bond transactions started increasing steeply last month, following a trial period that began after the ICSD-linked omnibus accounts were launched on June 27 as part of the Korean government’s efforts to enhance market accessibility for foreign investors.

The account balance, which stood at 21 billion won as of the end of July, rose to 542.5 billion won by September, and reached 1.06 trillion won as of Monday.

The monthly transaction volume took a steep jump as well, from 107.7 billion won in July to 806.1 billion won in August, 2.2 trillion won in September and 4.46 trillion won through the first 14 days of this month. The cumulative transaction volume exceeded 7.5 trillion won to date, according to KSD.

As the WGBI is tracked by funds worth more than $2.5 trillion, Korea's inclusion in the benchmark bond index, set to take effect starting in November of next year, is estimated to bring in capital worth approximately 75 trillion won, according to the government.

President Yoon Suk Yeol speaks during a cabinet meeting held at the presidential office in Yongsan District in central Seoul on Tuesday. [NEWS1]

The inclusion is expected to bring a steady inflow of capital into the Korean sovereign bond market, which would reduce interest rates while also enhancing market stability.

President Yoon Suk Yeol hailed the inclusion as “global recognition of the government’s efforts” in his remarks during a cabinet meeting on Tuesday, saying that the government will continue its efforts to advance the capital market with the Corporate Value-up Program and harsher penalties for illegal short selling.

BY SHIN HA-NEE [shin.hanee@joongang.co.kr]