Foreign Investors to Increase Use of Korean Government Bonds as WGBI Inclusion Looms; KSD Publishes Korean and English Guide

[Financial News] As Korean government bonds are set to be included in the World Government Bond Index (WGBI), foreign investors are expected to expand their investment in domestic government bonds. In response, KSD has released a guide to support the use of Korean government bonds as collateral by foreign investors.
KSD said on the 31st that it had published the 'Guide to the Use of Korean Government Bonds for Foreign Investors' in both Korean and English to improve foreign investors' understanding of Korean government bonds and encourage greater use of them as collateral.
The guide was prepared in anticipation of rising foreign investment in Korean government bonds and growing demand to use those holdings as collateral after Korea's bonds were added to the WGBI in April. The WGBI is a global government bond index compiled by FTSE Russell and includes government bonds from major economies such as the United States and Japan.
The government also said in its 'won internationalization roadmap' announced in July that it would seek to expand the use of domestic collateral, including government bonds, and allow lending transactions overseas to increase the utility of won-denominated bonds held by foreigners. The aim is to enable foreign investors to use Korean government bonds in a wider range of financial transactions, rather than simply holding them.
The guide covers domestic regulations, procedures for safekeeping and using government bonds, and major services. Foreign investors can refer to it when using their holdings for securities lending (SLB), repurchase agreements (Repo), and margin transactions in over-the-counter derivatives.
KSD expects that if foreign investors can use their government bond holdings in a variety of transactions, the investment appeal and utility of Korean government bonds will increase, helping attract additional foreign capital. The agency also plans to continue improving related infrastructure and services.
[email protected] Bae Han-geul Reporter