Individual investors are transitioning from bonds with maturities exceeding 10 years to short-term bonds with maturities of less than one year. (Image courtesy of Korea Bizwire)
SEOUL, Oct. 23 (Korea Bizwire) – In the current bond purchasing trend, individual investors are transitioning from bonds with maturities exceeding 10 years to short-term bonds with maturities of less than one year.
As interest rates surge and bond prices decline, driven by the Federal Reserve’s indication of a prolonged tightening stance, individual investors are displaying a preference for buying short-term bonds rather than selling their existing bonds.
According to the financial information provider Yonhap Infomax, individual investors net-purchased offshore bonds totaling 1.94 trillion won between October 4 and 20. Notably, 38 percent of this amount was dedicated to short-term bonds with maturities of less than six months.
Additionally, bonds with maturities ranging from six months to one year accounted for approximately 24 percent of the total purchases. In summary, short-term bonds with maturities of less than one year constituted 60 percent of the total offshore bond net purchases by individual investors this month.
As individual investors focus their acquisitions on short-term bonds, the duration of their won-denominated bond holdings (the average period for retrieving the principal invested in bonds) is gradually decreasing. The duration of individual investors’ won-denominated bond holdings was 3.57 years as of October 20. After steadily increasing from 2.83 years at the start of the year to 3.74 years last month, it started declining this month.
Breaking down bond preferences by type, individual investors exhibit a strong inclination toward short-term bonds. While the most-purchased bond by individual investors was the 30-year treasury bond in August, the three-year treasury bond took the lead in net purchases last month.
Cumulatively, individual investors have net-purchased 29.8 trillion won in the offshore bond market this year, surpassing last year’s total net purchase of 20.6 trillion won, a period marked by the popularized term ‘bond ant.’
J. S. Shin (js_shin@koreabizwire.com)
