Why did foreign investors become net sellers of Korean bonds in August 2026?

The article says the main reason was the erosion of arbitrage opportunities. Korean bonds lost their yield advantage over U.S. assets after currency hedging, making short-term currency-hedged investments less attractive.

How much did foreign investors sell of Korean bonds in August 2026, and how does that compare with earlier months?

They sold a net 839.7 billion won in August, their first monthly net selling since January 2023. Despite that, they still remained net buyers of 63.26 trillion won in the year through Sept. 11.

What role did WGBI inclusion play in the Korean bond market in August 2026?

Passive inflows tied to Korea’s phased inclusion in the World Government Bond Index helped cushion the selling pressure. Market watchers said foreign net selling would have been greater without those WGBI-related inflows.

Foreign investors turn net sellers of Korean bonds in Aug.

Listen

Summary

Foreign investors turned net sellers of Korean bonds in August for the first time in about 3 1/2 years as the yield advantage from currency-hedged investments declined. They sold a net 839.7 billion won last month, ending monthly net buying that had continued since January 2023. Their holdings fell by about 12.9 trillion won over 27 trading days, while WGBI-related inflows helped cushion the selling pressure.

Key Facts

Foreign investors sold a net 839.7 billion won worth of Korean bonds in August, according to investment bank and debt market data.
This was their first monthly net selling since January 2023.
Their Korean bond holdings fell from a record 356.6 trillion won on July 24 to 343.6 trillion won on Sept. 2, a drop of about 12.9 trillion won.

By Yonhap

Published Sep 13, 2026 11:12 am KST

An employee sorts 50,000-won banknotes at Hana Bank in Seoul, Jan. 7. Yonhap

Foreign investors turned net sellers of Korean bonds in August for the first time in about 3 1/2 years, industry data showed Sunday, as the yield advantage from currency-hedged investments declined.

Foreign investors sold a net 839.7 billion won ($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.

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 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.

Explore More